Correlation Between Polkadot and Balancer

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

Diversification Opportunities for Polkadot and Balancer

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Polkadot and Balancer is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Balancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balancer and Polkadot 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 Polkadot are associated (or correlated) with Balancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balancer has no effect on the direction of Polkadot i.e., Polkadot and Balancer go up and down completely randomly.

Pair Corralation between Polkadot and Balancer

Assuming the 90 days trading horizon Polkadot is expected to under-perform the Balancer. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polkadot is 1.13 times less risky than Balancer. The crypto coin trades about -0.09 of its potential returns per unit of risk. The Balancer is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  2,220  in Balancer on May 18, 2022 and sell it today you would lose (1,507)  from holding Balancer or give up 67.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Polkadot  vs.  Balancer

 Performance (%) 
       Timeline  
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 somewhat strong basic indicators, Polkadot is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polkadot Price Channel

Balancer 
Balancer Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Balancer are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Balancer may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Balancer Price Channel

Polkadot and Balancer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polkadot and Balancer

The main advantage of trading using opposite Polkadot and Balancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Balancer 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 Balancer will offset losses from the drop in Balancer's long position.
The idea behind Polkadot and Balancer 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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