Correlation Between UPP and Phala Network

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

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

Diversification Opportunities for UPP and Phala Network

0.73

Correlation Coefficient

UPP  Phala Network

Poor diversification

The 3 months correlation between UPP and Phala is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding UPP and Phala Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phala Network and UPP 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 UPP are associated (or correlated) with Phala Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phala Network has no effect on the direction of UPP i.e., UPP and Phala Network go up and down completely randomly.

Pair Corralation between UPP and Phala Network

Assuming the 90 days trading horizon UPP is expected to generate 0.79 times more return on investment than Phala Network. However, UPP is 1.27 times less risky than Phala Network. It trades about -0.04 of its potential returns per unit of risk. Phala Network is currently generating about -0.15 per unit of risk. If you would invest  8.97  in UPP on January 30, 2024 and sell it today you would lose (0.60) from holding UPP or give up 6.69% of portfolio value over 90 days.

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

UPP  vs.  Phala Network

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.

Phala Network

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phala Network are ranked lower than 13 (%) 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.

Pair Trading with UPP and Phala Network

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

The idea behind UPP and Phala Network 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..