Correlation Between True USD and Maker

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

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

Diversification Opportunities for True USD and Maker

0.61

Correlation Coefficient

True USD  Maker

Poor diversification

The 3 months correlation between True and Maker is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding True USD and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker 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 Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of True USD i.e., True USD and Maker go up and down completely randomly.

Pair Corralation between True USD and Maker

Assuming the 90 days trading horizon True USD is expected to generate 596.5 times less return on investment than Maker. But when comparing it to its historical volatility, True USD is 12.62 times less risky than Maker. It trades about 0.0 of its potential returns per unit of risk. Maker is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  74,506  in Maker on January 19, 2024 and sell it today you would earn a total of  245,232  from holding Maker or generate 329.14% return on investment over 90 days.

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

True USD  vs.  Maker

True USD

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in True USD are ranked lower than 1 (%) 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.

Maker

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with True USD and Maker

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

The idea behind True USD and Maker 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.