Correlation Between Theta Network and DIA

Can any of the company-specific risk be diversified away by investing in both Theta Network and DIA at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Theta Network and DIA into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Theta Network and DIA, you can compare the effects of market volatilities on Theta Network and DIA and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Theta Network with a short position of DIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Theta Network and DIA.

Diversification Opportunities for Theta Network and DIA

0.6

Correlation Coefficient

Theta Network  DIA

Poor diversification

The 3 months correlation between Theta and DIA is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Theta Network and DIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DIA and Theta Network is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Theta Network are associated (or correlated) with DIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DIA has no effect on the direction of Theta Network i.e., Theta Network and DIA go up and down completely randomly.

Pair Corralation between Theta Network and DIA

Assuming the 90 days trading horizon Theta Network is expected to generate 1.47 times less return on investment than DIA. But when comparing it to its historical volatility, Theta Network is 1.42 times less risky than DIA. It trades about 0.09 of its potential returns per unit of risk. DIA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  44.00  in DIA on April 23, 2025 and sell it today you would earn a total of  16.00  from holding DIA or generate 36.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Theta Network  vs.  DIA

Theta Network

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Theta Network are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Theta Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

DIA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DIA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DIA exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Theta Network and DIA

The main advantage of trading using opposite Theta Network and DIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Theta Network position performs unexpectedly, DIA can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in DIA will offset losses from the drop in DIA's long position.

The idea behind Theta Network and DIA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.