Correlation Between Cardano and Band Protocol

Can any of the company-specific risk be diversified away by investing in both Cardano 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 Cardano and Band Protocol into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cardano and Band Protocol, you can compare the effects of market volatilities on Cardano 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 Cardano with a short position of Band Protocol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardano and Band Protocol.

Diversification Opportunities for Cardano and Band Protocol

0.96

Correlation Coefficient

Cardano  Band Protocol

Almost no diversification

The 3 months correlation between Cardano and Band is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Band Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Band Protocol and Cardano 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 Cardano 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 Cardano i.e., Cardano and Band Protocol go up and down completely randomly.

Pair Corralation between Cardano and Band Protocol

Assuming the 90 days trading horizon Cardano is expected to generate 0.76 times more return on investment than Band Protocol. However, Cardano is 1.31 times less risky than Band Protocol. It trades about -0.19 of its potential returns per unit of risk. Band Protocol is currently generating about -0.18 per unit of risk. If you would invest  65.00  in Cardano on January 26, 2024 and sell it today you would lose (15.00) from holding Cardano or give up 23.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Cardano  vs.  Band Protocol

Cardano

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cardano are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cardano may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Band Protocol

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Band Protocol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Band Protocol is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cardano and Band Protocol

The main advantage of trading using opposite Cardano and Band Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardano 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 Cardano 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 the Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.