Correlation Between Yearnfinance and Band Protocol

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

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

Diversification Opportunities for Yearnfinance and Band Protocol

0.87

Correlation Coefficient

Yearnfinance  Band Protocol

Very poor diversification

The 3 months correlation between Yearnfinance and Band is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding yearnfinance and Band Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Band Protocol and Yearnfinance 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 yearnfinance 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 Yearnfinance i.e., Yearnfinance and Band Protocol go up and down completely randomly.

Pair Corralation between Yearnfinance and Band Protocol

Assuming the 90 days trading horizon yearnfinance is expected to generate 0.95 times more return on investment than Band Protocol. However, yearnfinance is 1.05 times less risky than Band Protocol. It trades about 0.03 of its potential returns per unit of risk. Band Protocol is currently generating about -0.02 per unit of risk. If you would invest  608,651  in yearnfinance on November 19, 2024 and sell it today you would lose (10,874) from holding yearnfinance or give up 1.79% of portfolio value over 90 days.

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

yearnfinance  vs.  Band Protocol

yearnfinance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in yearnfinance are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward indicators, Yearnfinance may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Band Protocol

Risk-Adjusted Performance

Very Weak

Over the last 90 days Band Protocol has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Band Protocol shareholders.

Pair Trading with Yearnfinance and Band Protocol

The main advantage of trading using opposite Yearnfinance and Band Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Yearnfinance 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 yearnfinance 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.