Correlation Between Terra and Lisk

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

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

Diversification Opportunities for Terra and Lisk

0.62

Correlation Coefficient

Terra  Lisk

Poor diversification

The 3 months correlation between Terra and Lisk is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Terra and Lisk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lisk 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 Lisk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lisk has no effect on the direction of Terra i.e., Terra and Lisk go up and down completely randomly.

Pair Corralation between Terra and Lisk

Assuming the 90 days trading horizon Terra is expected to under-perform the Lisk. But the crypto coin apears to be less risky and, when comparing its historical volatility, Terra is 1.79 times less risky than Lisk. The crypto coin trades about -0.07 of its potential returns per unit of risk. The Lisk is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  143.00  in Lisk on February 15, 2024 and sell it today you would earn a total of  48.00  from holding Lisk or generate 33.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Terra  vs.  Lisk

Terra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Terra shareholders.

Lisk

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Terra and Lisk

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

The idea behind Terra and Lisk 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.