Correlation Between Tether and Terra

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

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

Diversification Opportunities for Tether and Terra

0.0

Correlation Coefficient

Tether  Terra

Pay attention - limited upside

The 3 months correlation between Tether and Terra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Tether and Terra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terra and Tether 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 Tether 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 Tether i.e., Tether and Terra go up and down completely randomly.

Pair Corralation between Tether and Terra

Assuming the 90 days trading horizon Tether is not expected to generate positive returns. However, Tether is 515.65 times less risky than Terra. It waists most of its returns potential to compensate for thr risk taken. Terra is generating about 0.04 per unit of risk. If you would invest  0.00  in Terra on January 26, 2024 and sell it today you would earn a total of  63.00  from holding Terra or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.81%
Values	Daily Returns

Tether  vs.  Terra

Tether

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tether has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Tether is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Terra

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Terra are ranked lower than 2 (%) 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.

Pair Trading with Tether and Terra

The main advantage of trading using opposite Tether and Terra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tether 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 Tether 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.