Correlation Between Polkadot and Cosmos

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

Diversification Opportunities for Polkadot and Cosmos

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Polkadot and Cosmos is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Cosmos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos 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 Cosmos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmos has no effect on the direction of Polkadot i.e., Polkadot and Cosmos go up and down completely randomly.

Pair Corralation between Polkadot and Cosmos

Assuming the 90 days trading horizon Polkadot is expected to under-perform the Cosmos. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polkadot is 1.22 times less risky than Cosmos. The crypto coin trades about -0.09 of its potential returns per unit of risk. The Cosmos is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,431  in Cosmos on May 18, 2022 and sell it today you would lose (2,244)  from holding Cosmos or give up 65.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Polkadot  vs.  Cosmos

 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

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

Cosmos Price Channel

Polkadot and Cosmos Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polkadot and Cosmos

The main advantage of trading using opposite Polkadot and Cosmos positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Cosmos 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 Cosmos will offset losses from the drop in Cosmos' long position.
The idea behind Polkadot and Cosmos 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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