Correlation Between Terra and Tether

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

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

Diversification Opportunities for Terra and Tether

0.0
  Correlation Coefficient
Terra
Tether

Pay attention - limited upside

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

Pair Corralation between Terra and Tether

If you would invest  8,737  in Terra on October 19, 2021 and sell it today you would lose (7.00)  from holding Terra or give up 0.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Terra  vs.  Tether

 Performance (%) 
      Timeline 
Terra 
Terra Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Terra are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Terra sustained solid returns over the last few months and may actually be approaching a breakup point.

Terra Price Channel

Tether 
Tether Performance
0 of 100
Over the last 90 days Tether has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Tether is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tether Price Channel

Terra and Tether Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Terra and Tether

The main advantage of trading using opposite Terra and Tether positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terra position performs unexpectedly, Tether 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 Tether will offset losses from the drop in Tether's long position.
The idea behind Terra and Tether 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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