Correlation Between Chroma and Band Protocol

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

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

Diversification Opportunities for Chroma and Band Protocol

0.91

Correlation Coefficient

Chroma  Band Protocol

Almost no diversification

The 3 months correlation between Chroma and Band is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Chroma and Band Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Band Protocol and Chroma 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 Chroma are associated (or correlated) with Band Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Band Protocol has no effect on the direction of Chroma i.e., Chroma and Band Protocol go up and down completely randomly.

Pair Corralation between Chroma and Band Protocol

Assuming the 90 days trading horizon Chroma is expected to generate 1.09 times less return on investment than Band Protocol. In addition to that, Chroma is 1.13 times more volatile than Band Protocol. It trades about 0.15 of its total potential returns per unit of risk. Band Protocol is currently generating about 0.19 per unit of volatility. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Chroma  vs.  Band Protocol

Chroma

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chroma are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Chroma exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Chroma and Band Protocol

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

The idea behind Chroma and Band 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.