Correlation Between Polkadot and First Eagle

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Can any of the company-specific risk be diversified away by investing in both Polkadot and First Eagle 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 Polkadot and First Eagle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Polkadot and First Eagle High, you can compare the effects of market volatilities on Polkadot and First Eagle 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 Polkadot with a short position of First Eagle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polkadot and First Eagle.

Diversification Opportunities for Polkadot and First Eagle

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Polkadot and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and FIRST EAGLE HIGH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Eagle High and Polkadot 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 Polkadot are associated (or correlated) with First Eagle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Eagle High has no effect on the direction of Polkadot i.e., Polkadot and First Eagle go up and down completely randomly.

Pair Corralation between Polkadot and First Eagle

Assuming the 90 days trading horizon Polkadot is expected to generate 33.56 times more return on investment than First Eagle. However, Polkadot is 33.56 times more volatile than First Eagle High. It trades about 0.13 of its potential returns per unit of risk. First Eagle High is currently generating about 0.46 per unit of risk. If you would invest  835.00  in Polkadot on December 29, 2023 and sell it today you would earn a total of  112.00  from holding Polkadot or generate 13.41% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.65%
ValuesDaily Returns

Polkadot  vs.  FIRST EAGLE HIGH

 Performance 
       Timeline  
Polkadot 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Polkadot are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Polkadot exhibited solid returns over the last few months and may actually be approaching a breakup point.
First Eagle High 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in First Eagle High are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, First Eagle is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Polkadot and First Eagle Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Polkadot and First Eagle

The main advantage of trading using opposite Polkadot and First Eagle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, First Eagle 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 First Eagle will offset losses from the drop in First Eagle's long position.
The idea behind Polkadot and First Eagle High 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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