Correlation Between Uniswap Protocol and Terra

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Can any of the company-specific risk be diversified away by investing in both Uniswap Protocol and Terra 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 Uniswap Protocol and Terra into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Uniswap Protocol Token and Terra, you can compare the effects of market volatilities on Uniswap Protocol and Terra 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 Uniswap Protocol with a short position of Terra. Check out your portfolio center. Please also check ongoing floating volatility patterns of Uniswap Protocol and Terra.

Diversification Opportunities for Uniswap Protocol and Terra

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Uniswap and Terra is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Uniswap Protocol Token and Terra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terra and Uniswap Protocol 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 Uniswap Protocol Token are associated (or correlated) with Terra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terra has no effect on the direction of Uniswap Protocol i.e., Uniswap Protocol and Terra go up and down completely randomly.

Pair Corralation between Uniswap Protocol and Terra

Assuming the 90 days trading horizon Uniswap Protocol is expected to generate 10.13 times less return on investment than Terra. But when comparing it to its historical volatility, Uniswap Protocol Token is 7.53 times less risky than Terra. It trades about 0.03 of its potential returns per unit of risk. Terra is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Terra on December 29, 2023 and sell it today you would earn a total of  109.00  from holding Terra or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Uniswap Protocol Token  vs.  Terra

 Performance 
       Timeline  
Uniswap Protocol Token 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Uniswap Protocol Token are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Uniswap Protocol exhibited solid returns over the last few months and may actually be approaching a breakup point.
Terra 

Risk-Adjusted Performance

6 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Terra are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Terra exhibited solid returns over the last few months and may actually be approaching a breakup point.

Uniswap Protocol and Terra Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Uniswap Protocol and Terra

The main advantage of trading using opposite Uniswap Protocol and Terra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Uniswap Protocol position performs unexpectedly, Terra 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 Terra will offset losses from the drop in Terra's long position.
The idea behind Uniswap Protocol Token and Terra 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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