Correlation Between Chainlink and Sleepless
Can any of the company-specific risk be diversified away by investing in both Chainlink and Sleepless 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 Chainlink and Sleepless into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Sleepless, you can compare the effects of market volatilities on Chainlink and Sleepless 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 Chainlink with a short position of Sleepless. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Sleepless.
Diversification Opportunities for Chainlink and Sleepless
Poor diversification
The 3 months correlation between Chainlink and Sleepless is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Sleepless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sleepless and Chainlink 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 Chainlink are associated (or correlated) with Sleepless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sleepless has no effect on the direction of Chainlink i.e., Chainlink and Sleepless go up and down completely randomly.
Pair Corralation between Chainlink and Sleepless
Assuming the 90 days trading horizon Chainlink is expected to generate 7.67 times less return on investment than Sleepless. But when comparing it to its historical volatility, Chainlink is 7.6 times less risky than Sleepless. It trades about 0.06 of its potential returns per unit of risk. Sleepless is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.00 in Sleepless on August 24, 2024 and sell it today you would earn a total of 47.00 from holding Sleepless or generate 9.223372036854776E16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 58.17% |
| Values | Daily Returns |
Chainlink vs. Sleepless
Performance |
| Timeline |
| Chainlink |
| Sleepless |
Chainlink and Sleepless Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and Sleepless
The main advantage of trading using opposite Chainlink and Sleepless positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Sleepless 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 Sleepless will offset losses from the drop in Sleepless' long position.The idea behind Chainlink and Sleepless 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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