Correlation Between Chainlink and Balancer
Can any of the company-specific risk be diversified away by investing in both Chainlink and Balancer 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 Balancer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Balancer, you can compare the effects of market volatilities on Chainlink and Balancer 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 Balancer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Balancer.
Diversification Opportunities for Chainlink and Balancer
Very poor diversification
The 3 months correlation between Chainlink and Balancer is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Balancer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Balancer 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 Balancer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Balancer has no effect on the direction of Chainlink i.e., Chainlink and Balancer go up and down completely randomly.
Pair Corralation between Chainlink and Balancer
Assuming the 90 days trading horizon Chainlink is expected to generate 2.07 times more return on investment than Balancer. However, Chainlink is 2.07 times more volatile than Balancer. It trades about 0.07 of its potential returns per unit of risk. Balancer is currently generating about -0.05 per unit of risk. If you would invest 688.00 in Chainlink on August 27, 2024 and sell it today you would earn a total of 1,052 from holding Chainlink or generate 152.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chainlink vs. Balancer
Performance |
| Timeline |
| Chainlink |
| Balancer |
Chainlink and Balancer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and Balancer
The main advantage of trading using opposite Chainlink and Balancer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Balancer 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 Balancer will offset losses from the drop in Balancer's long position.The idea behind Chainlink and Balancer 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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