Correlation Between Curve DAO and COTI

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

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

Diversification Opportunities for Curve DAO and COTI

0.86

Correlation Coefficient

Curve DAO  COTI

Very poor diversification

The 3 months correlation between Curve and COTI is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and COTI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COTI and Curve DAO 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 Curve DAO Token are associated (or correlated) with COTI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COTI has no effect on the direction of Curve DAO i.e., Curve DAO and COTI go up and down completely randomly.

Pair Corralation between Curve DAO and COTI

Assuming the 90 days trading horizon Curve DAO Token is expected to under-perform the COTI. But the crypto coin apears to be less risky and, when comparing its historical volatility, Curve DAO Token is 1.43 times less risky than COTI. The crypto coin trades about -0.04 of its potential returns per unit of risk. The COTI is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  8.08  in COTI on January 21, 2024 and sell it today you would earn a total of  2.92  from holding COTI or generate 36.14% return on investment over 90 days.

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

Curve DAO Token  vs.  COTI

Curve DAO Token

Risk-Adjusted Performance

0 of 100

Very Weak

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

COTI

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COTI are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, COTI exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curve DAO and COTI

The main advantage of trading using opposite Curve DAO and COTI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Curve DAO position performs unexpectedly, COTI 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 COTI will offset losses from the drop in COTI's long position.

The idea behind Curve DAO Token and COTI 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.