Correlation Between BRC and Decred
Can any of the company-specific risk be diversified away by investing in both BRC 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 BRC and Decred into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRC and Decred, you can compare the effects of market volatilities on BRC 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 BRC with a short position of Decred. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and Decred.
Diversification Opportunities for BRC and Decred
Pay attention - limited upside
The 3 months correlation between BRC and Decred is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding BRC and Decred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decred and BRC 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 BRC 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 BRC i.e., BRC and Decred go up and down completely randomly.
Pair Corralation between BRC and Decred
Assuming the 90 days trading horizon BRC is expected to under-perform the Decred. But the crypto coin apears to be less risky and, when comparing its historical volatility, BRC is 1.53 times less risky than Decred. The crypto coin trades about -0.02 of its potential returns per unit of risk. The Decred is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 5,919 in Decred on January 17, 2024 and sell it today you would lose (3,957) from holding Decred or give up 66.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 72.12% |
| Values | Daily Returns |
BRC vs. Decred
Performance |
| Timeline |
| BRC |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Decred |
BRC and Decred Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRC and Decred
The main advantage of trading using opposite BRC and Decred positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC 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 BRC 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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