Correlation Between USD Coin and HEDG

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

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

Diversification Opportunities for USD Coin and HEDG

0.0

Correlation Coefficient

USD Coin  HEDG

Pay attention - limited upside

The 3 months correlation between USD and HEDG is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding USD Coin and HEDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEDG and USD Coin 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 USD Coin are associated (or correlated) with HEDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEDG has no effect on the direction of USD Coin i.e., USD Coin and HEDG go up and down completely randomly.

Pair Corralation between USD Coin and HEDG

Assuming the 90 days trading horizon USD Coin is expected to generate 14780.0 times less return on investment than HEDG. But when comparing it to its historical volatility, USD Coin is 160.0 times less risky than HEDG. It trades about 0.0 of its potential returns per unit of risk. HEDG is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  20.00  in HEDG on January 26, 2024 and sell it today you would lose (16.21) from holding HEDG or give up 81.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

USD Coin  vs.  HEDG

USD Coin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days USD Coin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, USD Coin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

HEDG

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEDG are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HEDG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with USD Coin and HEDG

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

The idea behind USD Coin and HEDG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.