Correlation Between Alpha Finance and Polkadot

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

Diversification Opportunities for Alpha Finance and Polkadot

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Alpha and Polkadot is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Finance Lab and Polkadot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polkadot and Alpha Finance 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 Alpha Finance Lab 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 Alpha Finance i.e., Alpha Finance and Polkadot go up and down completely randomly.

Pair Corralation between Alpha Finance and Polkadot

Assuming the 90 days trading horizon Alpha Finance Lab is expected to under-perform the Polkadot. In addition to that, Alpha Finance is 1.28 times more volatile than Polkadot. It trades about -0.07 of its total potential returns per unit of risk. Polkadot is currently generating about -0.09 per unit of volatility. If you would invest  4,284  in Polkadot on May 15, 2022 and sell it today you would lose (3,358)  from holding Polkadot or give up 78.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Alpha Finance Lab  vs.  Polkadot

 Performance (%) 
       Timeline  
Alpha Finance Lab 
Alpha Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Finance Lab are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical indicators, Alpha Finance sustained solid returns over the last few months and may actually be approaching a breakup point.

Alpha 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 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

Alpha Finance and Polkadot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alpha Finance and Polkadot

The main advantage of trading using opposite Alpha Finance and Polkadot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Finance 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.
The idea behind Alpha Finance Lab 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.
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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