Correlation Between Polkadot and Theta Network

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

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

Diversification Opportunities for Polkadot and Theta Network

0.9

Correlation Coefficient

Polkadot  Theta Network

Almost no diversification

The 3 months correlation between Polkadot and Theta is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Theta Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Theta Network and Polkadot 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 Polkadot are associated (or correlated) with Theta Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Theta Network has no effect on the direction of Polkadot i.e., Polkadot and Theta Network go up and down completely randomly.

Pair Corralation between Polkadot and Theta Network

Assuming the 90 days trading horizon Polkadot is expected to under-perform the Theta Network. But the crypto coin apears to be less risky and, when comparing its historical volatility, Polkadot is 1.31 times less risky than Theta Network. The crypto coin trades about -0.02 of its potential returns per unit of risk. The Theta Network is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Theta Network on May 4, 2025 and sell it today you would earn a total of  5.00  from holding Theta Network or generate 7.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.48%
Values	Daily Returns

Polkadot  vs.  Theta Network

Polkadot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Polkadot is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Theta Network

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Theta Network are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Theta Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Polkadot and Theta Network

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

The idea behind Polkadot and Theta 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.

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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.