Correlation Between Curve DAO and MTL

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

Diversification Opportunities for Curve DAO and MTL

0.87

Correlation Coefficient

Curve DAO  MTL

Very poor diversification

The 3 months correlation between Curve and MTL is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and MTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTL 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 MTL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTL has no effect on the direction of Curve DAO i.e., Curve DAO and MTL go up and down completely randomly.

Pair Corralation between Curve DAO and MTL

Assuming the 90 days trading horizon Curve DAO Token is expected to under-perform the MTL. In addition to that, Curve DAO is 1.01 times more volatile than MTL. It trades about -0.24 of its total potential returns per unit of risk. MTL is currently generating about -0.17 per unit of volatility. If you would invest  215.00  in MTL on February 7, 2024 and sell it today you would lose (46.00) from holding MTL or give up 21.4% 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.  MTL

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.

MTL

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MTL are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, MTL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curve DAO and MTL

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

The idea behind Curve DAO Token and MTL 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.