Correlation Between Chainlink and Gas
Can any of the company-specific risk be diversified away by investing in both Chainlink and Gas 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 Gas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Gas, you can compare the effects of market volatilities on Chainlink and Gas 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 Gas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Gas.
Diversification Opportunities for Chainlink and Gas
Poor diversification
The 3 months correlation between Chainlink and Gas is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gas 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 Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gas has no effect on the direction of Chainlink i.e., Chainlink and Gas go up and down completely randomly.
Pair Corralation between Chainlink and Gas
Assuming the 90 days trading horizon Chainlink is expected to generate 1.26 times more return on investment than Gas. However, Chainlink is 1.26 times more volatile than Gas. It trades about 0.09 of its potential returns per unit of risk. Gas is currently generating about 0.08 per unit of risk. If you would invest 627.00 in Chainlink on August 27, 2024 and sell it today you would earn a total of 1,113 from holding Chainlink or generate 177.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chainlink vs. Gas
Performance |
| Timeline |
| Chainlink |
| Gas |
Chainlink and Gas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and Gas
The main advantage of trading using opposite Chainlink and Gas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Gas 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 Gas will offset losses from the drop in Gas' long position.The idea behind Chainlink and Gas 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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