Correlation Between Polkadot and Moonbeam

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

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

Diversification Opportunities for Polkadot and Moonbeam

0.98

Correlation Coefficient

Polkadot  Moonbeam

Almost no diversification

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

Pair Corralation between Polkadot and Moonbeam

Assuming the 90 days trading horizon Polkadot is expected to generate 0.91 times more return on investment than Moonbeam. However, Polkadot is 1.1 times less risky than Moonbeam. It trades about 0.24 of its potential returns per unit of risk. Moonbeam is currently generating about 0.2 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.  Moonbeam

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.

Moonbeam

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Moonbeam are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Moonbeam exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polkadot and Moonbeam

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

The idea behind Polkadot and Moonbeam 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.