Correlation Between DigiByte and Perpetual Protocol

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

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

Diversification Opportunities for DigiByte and Perpetual Protocol

0.73

Correlation Coefficient

DigiByte  Perpetual Protocol

Poor diversification

The 3 months correlation between DigiByte and Perpetual is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding DigiByte and Perpetual Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perpetual Protocol and DigiByte 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 DigiByte 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 DigiByte i.e., DigiByte and Perpetual Protocol go up and down completely randomly.

Pair Corralation between DigiByte and Perpetual Protocol

Assuming the 90 days trading horizon DigiByte is expected to generate 2.81 times less return on investment than Perpetual Protocol. But when comparing it to its historical volatility, DigiByte is 2.39 times less risky than Perpetual Protocol. It trades about 0.05 of its potential returns per unit of risk. Perpetual Protocol is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Perpetual Protocol on January 20, 2024 and sell it today you would earn a total of  35.00  from holding Perpetual Protocol or generate 50.0% return on investment over 90 days.

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

DigiByte  vs.  Perpetual Protocol

DigiByte

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DigiByte are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, DigiByte 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 DigiByte and Perpetual Protocol

The main advantage of trading using opposite DigiByte and Perpetual Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DigiByte 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 DigiByte 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.