Correlation Between FARM and Drift Protocol

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

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

Diversification Opportunities for FARM and Drift Protocol

0.73

Correlation Coefficient

FARM  Drift Protocol

Poor diversification

The 3 months correlation between FARM and Drift is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding FARM and Drift protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drift protocol and FARM 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 FARM are associated (or correlated) with Drift Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Drift protocol has no effect on the direction of FARM i.e., FARM and Drift Protocol go up and down completely randomly.

Pair Corralation between FARM and Drift Protocol

Assuming the 90 days trading horizon FARM is expected to generate 6.17 times less return on investment than Drift Protocol. But when comparing it to its historical volatility, FARM is 5.77 times less risky than Drift Protocol. It trades about 0.13 of its potential returns per unit of risk. Drift protocol is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  48.00  in Drift protocol on September 1, 2024 and sell it today you would earn a total of  94.00  from holding Drift protocol or generate 195.83% return on investment over 90 days.

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

FARM  vs.  Drift protocol

FARM

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FARM are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, FARM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Drift protocol

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Drift protocol are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Drift Protocol exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FARM and Drift Protocol

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

The idea behind FARM and Drift 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..