Correlation Between Curve DAO and UPP

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

Diversification Opportunities for Curve DAO and UPP

0.77

Correlation Coefficient

Curve DAO  UPP

Poor diversification

The 3 months correlation between Curve and UPP is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Curve DAO Token and UPP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UPP 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 UPP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UPP has no effect on the direction of Curve DAO i.e., Curve DAO and UPP go up and down completely randomly.

Pair Corralation between Curve DAO and UPP

Assuming the 90 days trading horizon Curve DAO Token is expected to under-perform the UPP. In addition to that, Curve DAO is 1.06 times more volatile than UPP. It trades about -0.25 of its total potential returns per unit of risk. UPP is currently generating about -0.14 per unit of volatility. If you would invest  9.96  in UPP on February 7, 2024 and sell it today you would lose (1.78) from holding UPP or give up 17.87% of portfolio value over 90 days.

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

Curve DAO Token  vs.  UPP

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

UPP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in UPP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, UPP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Curve DAO and UPP

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

The idea behind Curve DAO Token and UPP 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.