Correlation Between Compound Governance and Gnosis

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Can any of the company-specific risk be diversified away by investing in both Compound Governance and Gnosis 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 Gnosis 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 Gnosis, you can compare the effects of market volatilities on Compound Governance and Gnosis 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 Gnosis. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compound Governance and Gnosis.

Diversification Opportunities for Compound Governance and Gnosis

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Compound and Gnosis is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Compound Governance Token and Gnosis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gnosis 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 Gnosis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gnosis has no effect on the direction of Compound Governance i.e., Compound Governance and Gnosis go up and down completely randomly.

Pair Corralation between Compound Governance and Gnosis

Assuming the 90 days trading horizon Compound Governance is expected to generate 1.07 times less return on investment than Gnosis. In addition to that, Compound Governance is 1.46 times more volatile than Gnosis. It trades about 0.09 of its total potential returns per unit of risk. Gnosis is currently generating about 0.15 per unit of volatility. If you would invest  11,451  in Gnosis on December 30, 2023 and sell it today you would earn a total of  25,210  from holding Gnosis or generate 220.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Compound Governance Token  vs.  Gnosis

 Performance 
       Timeline  
Compound Governance Token 

Risk-Adjusted Performance

10 of 100

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

Risk-Adjusted Performance

18 of 100

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

Compound Governance and Gnosis Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Compound Governance and Gnosis

The main advantage of trading using opposite Compound Governance and Gnosis positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compound Governance position performs unexpectedly, Gnosis 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 Gnosis will offset losses from the drop in Gnosis' long position.
The idea behind Compound Governance Token and Gnosis 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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