Correlation Between KEY and Solana
Can any of the company-specific risk be diversified away by investing in both KEY and Solana 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 KEY and Solana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KEY and Solana, you can compare the effects of market volatilities on KEY and Solana 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 KEY with a short position of Solana. Check out your portfolio center. Please also check ongoing floating volatility patterns of KEY and Solana.
Diversification Opportunities for KEY and Solana
Excellent diversification
The 3 months correlation between KEY and Solana is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding KEY and Solana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solana and KEY 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 KEY are associated (or correlated) with Solana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solana has no effect on the direction of KEY i.e., KEY and Solana go up and down completely randomly.
Pair Corralation between KEY and Solana
Assuming the 90 days trading horizon KEY is expected to under-perform the Solana. In addition to that, KEY is 1.44 times more volatile than Solana. It trades about -0.05 of its total potential returns per unit of risk. Solana is currently generating about 0.09 per unit of volatility. If you would invest 16,833 in Solana on August 27, 2024 and sell it today you would earn a total of 8,687 from holding Solana or generate 51.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KEY vs. Solana
Performance |
| Timeline |
| KEY |
| Solana |
KEY and Solana Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KEY and Solana
The main advantage of trading using opposite KEY and Solana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KEY position performs unexpectedly, Solana 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 Solana will offset losses from the drop in Solana's long position.The idea behind KEY and Solana 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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