Correlation Between Curve DAO and DODO

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Can any of the company-specific risk be diversified away by investing in both Curve DAO and DODO 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 DODO 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 DODO, you can compare the effects of market volatilities on Curve DAO and DODO 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 DODO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Curve DAO and DODO.

Diversification Opportunities for Curve DAO and DODO

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Curve and DODO is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and DODO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DODO 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 DODO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DODO has no effect on the direction of Curve DAO i.e., Curve DAO and DODO go up and down completely randomly.

Pair Corralation between Curve DAO and DODO

Assuming the 90 days trading horizon Curve DAO is expected to generate 2.37 times less return on investment than DODO. But when comparing it to its historical volatility, Curve DAO Token is 1.37 times less risky than DODO. It trades about 0.08 of its potential returns per unit of risk. DODO is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  11.00  in DODO on December 29, 2023 and sell it today you would earn a total of  15.00  from holding DODO or generate 136.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Curve DAO Token  vs.  DODO

 Performance 
       Timeline  
Curve DAO Token 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Curve DAO Token are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Curve DAO exhibited solid returns over the last few months and may actually be approaching a breakup point.
DODO 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in DODO are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DODO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Curve DAO and DODO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Curve DAO and DODO

The main advantage of trading using opposite Curve DAO and DODO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Curve DAO position performs unexpectedly, DODO 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 DODO will offset losses from the drop in DODO's long position.
The idea behind Curve DAO Token and DODO 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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