Correlation Between Curve DAO and Phala Network

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

Diversification Opportunities for Curve DAO and Phala Network

0.5

Correlation Coefficient

Curve DAO  Phala Network

Very weak diversification

The 3 months correlation between Curve and Phala is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and Phala Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phala Network 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 Phala Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phala Network has no effect on the direction of Curve DAO i.e., Curve DAO and Phala Network go up and down completely randomly.

Pair Corralation between Curve DAO and Phala Network

Assuming the 90 days trading horizon Curve DAO Token is expected to under-perform the Phala Network. But the crypto coin apears to be less risky and, when comparing its historical volatility, Curve DAO Token is 1.51 times less risky than Phala Network. The crypto coin trades about -0.02 of its potential returns per unit of risk. The Phala Network is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  22.00  in Phala Network on January 26, 2024 and sell it today you would lose (1.00) from holding Phala Network or give up 4.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.81%
Values	Daily Returns

Curve DAO Token  vs.  Phala Network

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.

Phala Network

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phala Network are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Phala Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curve DAO and Phala Network

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

The idea behind Curve DAO Token and Phala Network 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.