Correlation Between Terra and Bella Protocol

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

Diversification Opportunities for Terra and Bella Protocol

0.31
  Correlation Coefficient

Weak diversification

The 3 months correlation between Terra and Bella is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Terra and Bella Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bella Protocol 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 Bella Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bella Protocol has no effect on the direction of Terra i.e., Terra and Bella Protocol go up and down completely randomly.

Pair Corralation between Terra and Bella Protocol

Assuming the 90 days trading horizon Terra is expected to generate 5.25 times more return on investment than Bella Protocol. However, Terra is 5.25 times more volatile than Bella Protocol. It trades about 0.07 of its potential returns per unit of risk. Bella Protocol is currently generating about 0.02 per unit of risk. If you would invest  4,096  in Terra on April 5, 2022 and sell it today you would lose (3,885)  from holding Terra or give up 94.85% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Terra  vs.  Bella Protocol

 Performance (%) 
      Timeline 
Terra 
Terra Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Terra are ranked lower than 7 (%) 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

Bella Protocol 
Bella Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bella Protocol are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Bella Protocol sustained solid returns over the last few months and may actually be approaching a breakup point.

Bella Price Channel

Terra and Bella Protocol Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Terra and Bella Protocol

The main advantage of trading using opposite Terra and Bella Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terra position performs unexpectedly, Bella Protocol 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 Bella Protocol will offset losses from the drop in Bella Protocol's long position.
The idea behind Terra and Bella Protocol 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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