Correlation Between Compound Governance and VeChain

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

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

Diversification Opportunities for Compound Governance and VeChain

0.98

Correlation Coefficient

Compound Governance  VeChain

Almost no diversification

The 3 months correlation between Compound and VeChain is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Compound Governance Token and VeChain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VeChain and Compound Governance 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 Compound Governance Token are associated (or correlated) with VeChain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VeChain has no effect on the direction of Compound Governance i.e., Compound Governance and VeChain go up and down completely randomly.

Pair Corralation between Compound Governance and VeChain

Assuming the 90 days trading horizon Compound Governance is expected to generate 1.19 times less return on investment than VeChain. But when comparing it to its historical volatility, Compound Governance Token is 1.12 times less risky than VeChain. It trades about 0.22 of its potential returns per unit of risk. VeChain is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  2.14  in VeChain on September 3, 2024 and sell it today you would earn a total of  2.45  from holding VeChain or generate 114.49% return on investment over 90 days.

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

Compound Governance Token  vs.  VeChain

Compound Governance Token

Risk-Adjusted Performance

17 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Compound Governance Token are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Compound Governance exhibited solid returns over the last few months and may actually be approaching a breakup point.

VeChain

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in VeChain are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, VeChain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Compound Governance and VeChain

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

The idea behind Compound Governance Token and VeChain 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.