Correlation Between DATA and Perpetual Protocol

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

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

Diversification Opportunities for DATA and Perpetual Protocol

0.85

Correlation Coefficient

DATA  Perpetual Protocol

Very poor diversification

The 3 months correlation between DATA and Perpetual is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding DATA and Perpetual Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perpetual Protocol and DATA 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 DATA 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 DATA i.e., DATA and Perpetual Protocol go up and down completely randomly.

Pair Corralation between DATA and Perpetual Protocol

Assuming the 90 days trading horizon DATA is expected to generate 0.98 times more return on investment than Perpetual Protocol. However, DATA is 1.02 times less risky than Perpetual Protocol. It trades about -0.04 of its potential returns per unit of risk. Perpetual Protocol is currently generating about -0.18 per unit of risk. If you would invest  7.77  in DATA on January 25, 2024 and sell it today you would lose (0.90) from holding DATA or give up 11.58% of portfolio value over 90 days.

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

DATA  vs.  Perpetual Protocol

DATA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DATA exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 DATA and Perpetual Protocol

The main advantage of trading using opposite DATA and Perpetual Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DATA 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 DATA 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.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.