Correlation Between UPP and TrueFi
Can any of the company-specific risk be diversified away by investing in both UPP and TrueFi 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 UPP and TrueFi into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UPP and TrueFi, you can compare the effects of market volatilities on UPP and TrueFi 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 UPP with a short position of TrueFi. Check out your portfolio center. Please also check ongoing floating volatility patterns of UPP and TrueFi.
Diversification Opportunities for UPP and TrueFi
Poor diversification
The 3 months correlation between UPP and TrueFi is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding UPP and TrueFi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TrueFi and UPP 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 UPP are associated (or correlated) with TrueFi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TrueFi has no effect on the direction of UPP i.e., UPP and TrueFi go up and down completely randomly.
Pair Corralation between UPP and TrueFi
Assuming the 90 days trading horizon UPP is expected to under-perform the TrueFi. But the crypto coin apears to be less risky and, when comparing its historical volatility, UPP is 1.82 times less risky than TrueFi. The crypto coin trades about -0.11 of its potential returns per unit of risk. The TrueFi is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 16.00 in TrueFi on January 24, 2024 and sell it today you would lose (3.00) from holding TrueFi or give up 18.75% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
UPP vs. TrueFi
Performance |
Timeline |
UPP |
TrueFi |
UPP and TrueFi Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with UPP and TrueFi
The main advantage of trading using opposite UPP and TrueFi positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UPP position performs unexpectedly, TrueFi 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 TrueFi will offset losses from the drop in TrueFi's long position.The idea behind UPP and TrueFi 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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