Correlation Between Polkadot and Internet Computer

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

Diversification Opportunities for Polkadot and Internet Computer

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Polkadot and Internet is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Internet Computer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Internet Computer 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 Internet Computer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Internet Computer has no effect on the direction of Polkadot i.e., Polkadot and Internet Computer go up and down completely randomly.

Pair Corralation between Polkadot and Internet Computer

Assuming the 90 days trading horizon Polkadot is expected to under-perform the Internet Computer. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polkadot is 1.2 times less risky than Internet Computer. The crypto coin trades about -0.1 of its potential returns per unit of risk. The Internet Computer is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  4,465  in Internet Computer on May 11, 2022 and sell it today you would lose (3,636)  from holding Internet Computer or give up 81.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Polkadot  vs.  Internet Computer

 Performance (%) 
       Timeline  
Polkadot 
Polkadot Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Polkadot are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Polkadot may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Polkadot Price Channel

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

Internet Price Channel

Polkadot and Internet Computer Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polkadot and Internet Computer

The main advantage of trading using opposite Polkadot and Internet Computer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Internet Computer 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 Internet Computer will offset losses from the drop in Internet Computer's long position.
The idea behind Polkadot and Internet Computer 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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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