Correlation Between Band Protocol and Frax

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

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

Diversification Opportunities for Band Protocol and Frax

0.56

Correlation Coefficient

Band Protocol  Frax

Very weak diversification

The 3 months correlation between Band and Frax is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Band Protocol and Frax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Frax and Band Protocol 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 Band Protocol are associated (or correlated) with Frax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Frax has no effect on the direction of Band Protocol i.e., Band Protocol and Frax go up and down completely randomly.

Pair Corralation between Band Protocol and Frax

Assuming the 90 days trading horizon Band Protocol is expected to generate 2.46 times more return on investment than Frax. However, Band Protocol is 2.46 times more volatile than Frax. It trades about 0.19 of its potential returns per unit of risk. Frax is currently generating about 0.03 per unit of risk. If you would invest  105.00  in Band Protocol on September 1, 2024 and sell it today you would earn a total of  75.00  from holding Band Protocol or generate 71.43% return on investment over 90 days.

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

Band Protocol  vs.  Frax

Band Protocol

Risk-Adjusted Performance

14 of 100

Good

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

Frax

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Frax are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Frax is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Band Protocol and Frax

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

The idea behind Band Protocol and Frax 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.