Correlation Between Compound Governance and Origin Protocol

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

Diversification Opportunities for Compound Governance and Origin Protocol

0.84

Correlation Coefficient

Compound Governance  Origin Protocol

Very poor diversification

The 3 months correlation between Compound and Origin is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Compound Governance Token and Origin Protocol in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Protocol 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 Origin Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Protocol has no effect on the direction of Compound Governance i.e., Compound Governance and Origin Protocol go up and down completely randomly.

Pair Corralation between Compound Governance and Origin Protocol

Assuming the 90 days trading horizon Compound Governance Token is expected to generate 0.9 times more return on investment than Origin Protocol. However, Compound Governance Token is 1.12 times less risky than Origin Protocol. It trades about 0.01 of its potential returns per unit of risk. Origin Protocol is currently generating about 0.0 per unit of risk. If you would invest  12,241  in Compound Governance Token on January 17, 2024 and sell it today you would lose (7,117) from holding Compound Governance Token or give up 58.14% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.81%
Values	Daily Returns

Compound Governance Token  vs.  Origin Protocol

Compound Governance Token

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compound Governance Token are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Compound Governance may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Origin Protocol

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Origin Protocol are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Origin Protocol may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Compound Governance and Origin Protocol

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

The idea behind Compound Governance Token and Origin 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.