Correlation Between Phala Network and MLN

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

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

Diversification Opportunities for Phala Network and MLN

0.79

Correlation Coefficient

Phala Network  MLN

Poor diversification

The 3 months correlation between Phala and MLN is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Phala Network and MLN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MLN and Phala Network 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 Phala Network are associated (or correlated) with MLN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MLN has no effect on the direction of Phala Network i.e., Phala Network and MLN go up and down completely randomly.

Pair Corralation between Phala Network and MLN

Assuming the 90 days trading horizon Phala Network is expected to under-perform the MLN. In addition to that, Phala Network is 1.38 times more volatile than MLN. It trades about -0.16 of its total potential returns per unit of risk. MLN is currently generating about -0.14 per unit of volatility. If you would invest  2,632  in MLN on February 7, 2024 and sell it today you would lose (410.00) from holding MLN or give up 15.58% of portfolio value over 90 days.

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

Phala Network  vs.  MLN

Phala Network

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phala Network are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Phala Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

MLN

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Phala Network and MLN

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

The idea behind Phala Network and MLN 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.