Correlation Between Polkadot and Band Protocol

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

Diversification Opportunities for Polkadot and Band Protocol

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Polkadot and Band Protocol is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Band Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Band Protocol 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 Band Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Band Protocol has no effect on the direction of Polkadot i.e., Polkadot and Band Protocol go up and down completely randomly.

Pair Corralation between Polkadot and Band Protocol

Assuming the 90 days trading horizon Polkadot is expected to under-perform the Band Protocol. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polkadot is 1.2 times less risky than Band Protocol. The crypto coin trades about -0.09 of its potential returns per unit of risk. The Band Protocol is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  867.00  in Band Protocol on May 9, 2022 and sell it today you would lose (683.00)  from holding Band Protocol or give up 78.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Polkadot  vs.  Band Protocol

 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 latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Polkadot investors.

Polkadot Price Channel

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

Band Protocol Price Channel

Polkadot and Band Protocol Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polkadot and Band Protocol

The main advantage of trading using opposite Polkadot and Band Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Band 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 Band Protocol will offset losses from the drop in Band Protocol's long position.
The idea behind Polkadot and Band 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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