Correlation Between NEO and Compound Governance
Can any of the company-specific risk be diversified away by investing in both NEO and Compound Governance 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 NEO and Compound Governance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NEO and Compound Governance Token, you can compare the effects of market volatilities on NEO and Compound Governance 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 NEO with a short position of Compound Governance. Check out your portfolio center. Please also check ongoing floating volatility patterns of NEO and Compound Governance.
Diversification Opportunities for NEO and Compound Governance
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NEO and Compound is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding NEO and Compound Governance Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compound Governance Token and NEO 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 NEO are associated (or correlated) with Compound Governance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compound Governance Token has no effect on the direction of NEO i.e., NEO and Compound Governance go up and down completely randomly.
Pair Corralation between NEO and Compound Governance
Assuming the 90 days trading horizon NEO is expected to generate 0.9 times more return on investment than Compound Governance. However, NEO is 1.11 times less risky than Compound Governance. It trades about 0.14 of its potential returns per unit of risk. Compound Governance Token is currently generating about -0.1 per unit of risk. If you would invest 1,340 in NEO on December 29, 2023 and sell it today you would earn a total of 215.00 from holding NEO or generate 16.04% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
NEO vs. Compound Governance Token
Performance |
Timeline |
NEO |
Compound Governance Token |
NEO and Compound Governance Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NEO and Compound Governance
The main advantage of trading using opposite NEO and Compound Governance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEO position performs unexpectedly, Compound Governance 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 Compound Governance will offset losses from the drop in Compound Governance's long position.The idea behind NEO and Compound Governance Token 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.Compound Governance vs. Solana | Compound Governance vs. XRP | Compound Governance vs. Staked Ether | Compound Governance vs. Avalanche |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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