Correlation Between DigiByte and LUKSO

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

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

Diversification Opportunities for DigiByte and LUKSO

0.49

Correlation Coefficient

DigiByte  LUKSO

Very weak diversification

The 3 months correlation between DigiByte and LUKSO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding DigiByte and LUKSO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUKSO and DigiByte 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 DigiByte are associated (or correlated) with LUKSO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUKSO has no effect on the direction of DigiByte i.e., DigiByte and LUKSO go up and down completely randomly.

Pair Corralation between DigiByte and LUKSO

Assuming the 90 days trading horizon DigiByte is expected to generate 22.13 times less return on investment than LUKSO. But when comparing it to its historical volatility, DigiByte is 3.9 times less risky than LUKSO. It trades about 0.01 of its potential returns per unit of risk. LUKSO is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,007  in LUKSO on January 25, 2024 and sell it today you would lose (14.00) from holding LUKSO or give up 1.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.81%
Values	Daily Returns

DigiByte  vs.  LUKSO

DigiByte

Risk-Adjusted Performance

13 of 100

Good

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

LUKSO

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LUKSO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, LUKSO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DigiByte and LUKSO

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

The idea behind DigiByte and LUKSO 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.