Correlation Between Curve DAO and Illuvium

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

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

Diversification Opportunities for Curve DAO and Illuvium

0.84

Correlation Coefficient

Curve DAO  Illuvium

Very poor diversification

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

Pair Corralation between Curve DAO and Illuvium

Assuming the 90 days trading horizon Curve DAO Token is expected to under-perform the Illuvium. But the crypto coin apears to be less risky and, when comparing its historical volatility, Curve DAO Token is 1.13 times less risky than Illuvium. The crypto coin trades about -0.2 of its potential returns per unit of risk. The Illuvium is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  14,640  in Illuvium on February 7, 2024 and sell it today you would lose (4,816) from holding Illuvium or give up 32.9% of portfolio value over 90 days.

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

Curve DAO Token  vs.  Illuvium

Curve DAO Token

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Curve DAO Token has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Curve DAO is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Illuvium

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Illuvium are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Illuvium exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curve DAO and Illuvium

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

The idea behind Curve DAO Token and Illuvium 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..