Correlation Between Polkadot and NFPrompt

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

By analyzing existing cross correlation between Polkadot and NFPrompt, you can compare the effects of market volatilities on Polkadot and NFPrompt 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 NFPrompt. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polkadot and NFPrompt.

Diversification Opportunities for Polkadot and NFPrompt

0.91

Correlation Coefficient

Polkadot  NFPrompt

Almost no diversification

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

Pair Corralation between Polkadot and NFPrompt

Assuming the 90 days trading horizon Polkadot is expected to generate 0.89 times more return on investment than NFPrompt. However, Polkadot is 1.13 times less risky than NFPrompt. It trades about 0.24 of its potential returns per unit of risk. NFPrompt is currently generating about 0.19 per unit of risk. If you would invest  411.00  in Polkadot on September 3, 2024 and sell it today you would earn a total of  484.00  from holding Polkadot or generate 117.76% return on investment over 90 days.

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

Polkadot  vs.  NFPrompt

Polkadot

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Polkadot are ranked lower than 18 (%) 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.

NFPrompt

Risk-Adjusted Performance

14 of 100

Good

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

Pair Trading with Polkadot and NFPrompt

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

The idea behind Polkadot and NFPrompt 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..