Correlation Between GMX and Drift Protocol

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

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

Diversification Opportunities for GMX and Drift Protocol

0.94

Correlation Coefficient

GMX  Drift Protocol

Almost no diversification

The 3 months correlation between GMX and Drift is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding GMX and Drift protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Drift protocol and GMX 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 GMX 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 GMX i.e., GMX and Drift Protocol go up and down completely randomly.

Pair Corralation between GMX and Drift Protocol

Assuming the 90 days trading horizon GMX is expected to generate 0.99 times more return on investment than Drift Protocol. However, GMX is 1.01 times less risky than Drift Protocol. It trades about -0.15 of its potential returns per unit of risk. Drift protocol is currently generating about -0.16 per unit of risk. If you would invest  2,709  in GMX on December 29, 2024 and sell it today you would lose (1,393) from holding GMX or give up 51.42% of portfolio value over 90 days.

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

GMX  vs.  Drift protocol

GMX

Risk-Adjusted Performance

Very Weak

Over the last 90 days GMX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for GMX shareholders.

Drift protocol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Drift protocol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Drift protocol shareholders.

Pair Trading with GMX and Drift Protocol

The main advantage of trading using opposite GMX and Drift Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GMX 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 GMX 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.