Correlation Between True USD and Decred

Can any of the company-specific risk be diversified away by investing in both True USD and Decred 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 True USD and Decred into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between True USD and Decred, you can compare the effects of market volatilities on True USD and Decred 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 True USD with a short position of Decred. Check out your portfolio center. Please also check ongoing floating volatility patterns of True USD and Decred.

Diversification Opportunities for True USD and Decred

0.6

Correlation Coefficient

True USD  Decred

Poor diversification

The 3 months correlation between True and Decred is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding True USD and Decred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decred and True USD 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 True USD are associated (or correlated) with Decred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decred has no effect on the direction of True USD i.e., True USD and Decred go up and down completely randomly.

Pair Corralation between True USD and Decred

Assuming the 90 days trading horizon True USD is expected to generate 88.38 times less return on investment than Decred. But when comparing it to its historical volatility, True USD is 11.83 times less risky than Decred. It trades about 0.0 of its potential returns per unit of risk. Decred is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,697  in Decred on January 24, 2024 and sell it today you would lose (407.00) from holding Decred or give up 15.09% of portfolio value over 90 days.

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

True USD  vs.  Decred

True USD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in True USD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, True USD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Decred

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Decred are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Decred exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with True USD and Decred

The main advantage of trading using opposite True USD and Decred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if True USD position performs unexpectedly, Decred 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 Decred will offset losses from the drop in Decred's long position.

The idea behind True USD and Decred 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.

Check out your portfolio center.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.