Correlation Between Curve DAO and Perpetual Protocol

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

Diversification Opportunities for Curve DAO and Perpetual Protocol

0.94

Correlation Coefficient

Curve DAO  Perpetual Protocol

Almost no diversification

The 3 months correlation between Curve and Perpetual is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and Perpetual Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perpetual Protocol 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 Perpetual Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perpetual Protocol has no effect on the direction of Curve DAO i.e., Curve DAO and Perpetual Protocol go up and down completely randomly.

Pair Corralation between Curve DAO and Perpetual Protocol

Assuming the 90 days trading horizon Curve DAO Token is expected to under-perform the Perpetual Protocol. But the crypto coin apears to be less risky and, when comparing its historical volatility, Curve DAO Token is 1.35 times less risky than Perpetual Protocol. The crypto coin trades about -0.31 of its potential returns per unit of risk. The Perpetual Protocol is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Perpetual Protocol on January 20, 2024 and sell it today you would lose (43.00) from holding Perpetual Protocol or give up 29.05% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.65%
Values	Daily Returns

Curve DAO Token  vs.  Perpetual Protocol

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.

Perpetual Protocol

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Perpetual Protocol are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Perpetual Protocol may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Curve DAO and Perpetual Protocol

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

The idea behind Curve DAO Token and Perpetual 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.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .