Correlation Between Tezos and Maker
Can any of the company-specific risk be diversified away by investing in both Tezos 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 Tezos and Maker into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tezos and Maker, you can compare the effects of market volatilities on Tezos 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 Tezos with a short position of Maker. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tezos and Maker.
Diversification Opportunities for Tezos and Maker
Very weak diversification
The 3 months correlation between Tezos and Maker is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tezos and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker and Tezos 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 Tezos 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 Tezos i.e., Tezos and Maker go up and down completely randomly.
Pair Corralation between Tezos and Maker
Assuming the 90 days trading horizon Tezos is expected to under-perform the Maker. But the crypto coin apears to be less risky and, when comparing its historical volatility, Tezos is 1.23 times less risky than Maker. The crypto coin trades about -0.26 of its potential returns per unit of risk. The Maker is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 329,490 in Maker on January 26, 2024 and sell it today you would lose (40,212) from holding Maker or give up 12.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tezos vs. Maker
Performance |
| Timeline |
| Tezos |
| Maker |
Tezos and Maker Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tezos and Maker
The main advantage of trading using opposite Tezos and Maker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tezos 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 Tezos 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.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.
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