Correlation Between LRN and GAIA

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

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

Diversification Opportunities for LRN and GAIA

0.4

Correlation Coefficient

LRN  GAIA

Very weak diversification

The 3 months correlation between LRN and GAIA is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding LRN and GAIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GAIA and LRN 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 LRN are associated (or correlated) with GAIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GAIA has no effect on the direction of LRN i.e., LRN and GAIA go up and down completely randomly.

Pair Corralation between LRN and GAIA

Assuming the 90 days trading horizon LRN is expected to generate 40.55 times less return on investment than GAIA. But when comparing it to its historical volatility, LRN is 18.7 times less risky than GAIA. It trades about 0.1 of its potential returns per unit of risk. GAIA is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.00  in GAIA on February 17, 2024 and sell it today you would earn a total of  0.56  from holding GAIA or generate 9.223372036854776E16% return on investment over 90 days.

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

LRN  vs.  GAIA

LRN

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LRN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for LRN shareholders.

GAIA

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with LRN and GAIA

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

The idea behind LRN and GAIA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.