Correlation Between Avalanche and Polkadot

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

Diversification Opportunities for Avalanche and Polkadot

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Avalanche and Polkadot is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Polkadot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polkadot and Avalanche 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 Avalanche are associated (or correlated) with Polkadot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polkadot has no effect on the direction of Avalanche i.e., Avalanche and Polkadot go up and down completely randomly.

Pair Corralation between Avalanche and Polkadot

Assuming the 90 days trading horizon Avalanche is expected to generate 1.78 times more return on investment than Polkadot. However, Avalanche is 1.78 times more volatile than Polkadot. It trades about -0.03 of its potential returns per unit of risk. Polkadot is currently generating about -0.2 per unit of risk. If you would invest  6,153  in Avalanche on July 8, 2022 and sell it today you would lose (4,418)  from holding Avalanche or give up 71.8% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy16.33%
ValuesDaily Returns

Avalanche  vs.  Polkadot

 Performance (%) 
       Timeline  
Avalanche 
Avalanche Performance
0 of 100
Over the last 90 days Avalanche has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Avalanche is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Avalanche Price Channel

Polkadot 
Polkadot Performance
0 of 100
Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for Polkadot investors.

Polkadot Price Channel

Avalanche and Polkadot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avalanche and Polkadot

The main advantage of trading using opposite Avalanche and Polkadot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche position performs unexpectedly, Polkadot 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 Polkadot will offset losses from the drop in Polkadot's long position.
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The idea behind Avalanche and Polkadot 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.
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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