Correlation Between Chainlink and JAR
Can any of the company-specific risk be diversified away by investing in both Chainlink and JAR 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 JAR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and JAR, you can compare the effects of market volatilities on Chainlink and JAR 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 JAR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and JAR.
Diversification Opportunities for Chainlink and JAR
Almost no diversification
The 3 months correlation between Chainlink and JAR is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and JAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAR 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 JAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAR has no effect on the direction of Chainlink i.e., Chainlink and JAR go up and down completely randomly.
Pair Corralation between Chainlink and JAR
Assuming the 90 days trading horizon Chainlink is expected to generate 1.22 times more return on investment than JAR. However, Chainlink is 1.22 times more volatile than JAR. It trades about 0.43 of its potential returns per unit of risk. JAR is currently generating about 0.43 per unit of risk. If you would invest 1,099 in Chainlink on August 26, 2024 and sell it today you would earn a total of 641.00 from holding Chainlink or generate 58.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chainlink vs. JAR
Performance |
| Timeline |
| Chainlink |
| JAR |
Chainlink and JAR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and JAR
The main advantage of trading using opposite Chainlink and JAR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, JAR 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 JAR will offset losses from the drop in JAR's long position.The idea behind Chainlink and JAR 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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