Correlation Between Curve DAO and CAPP

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

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

Diversification Opportunities for Curve DAO and CAPP

0.32

Correlation Coefficient

Curve DAO  CAPP

Weak diversification

The 3 months correlation between Curve and CAPP is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and CAPP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CAPP and Curve DAO 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 Curve DAO Token are associated (or correlated) with CAPP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CAPP has no effect on the direction of Curve DAO i.e., Curve DAO and CAPP go up and down completely randomly.

Pair Corralation between Curve DAO and CAPP

Assuming the 90 days trading horizon Curve DAO Token is expected to generate 4.01 times more return on investment than CAPP. However, Curve DAO is 4.01 times more volatile than CAPP. It trades about 0.03 of its potential returns per unit of risk. CAPP is currently generating about -0.01 per unit of risk. If you would invest  50.00  in Curve DAO Token on November 27, 2024 and sell it today you would lose (5.00) from holding Curve DAO Token or give up 10.0% of portfolio value over 90 days.

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

Curve DAO Token  vs.  CAPP

Curve DAO Token

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Curve DAO Token are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Curve DAO exhibited solid returns over the last few months and may actually be approaching a breakup point.

CAPP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CAPP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, CAPP is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Curve DAO and CAPP

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

The idea behind Curve DAO Token and CAPP 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.