Correlation Between Chainlink and Uniswap Protocol
Can any of the company-specific risk be diversified away by investing in both Chainlink and Uniswap Protocol 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 Uniswap Protocol into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Uniswap Protocol Token, you can compare the effects of market volatilities on Chainlink and Uniswap Protocol 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 Uniswap Protocol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Uniswap Protocol.
Diversification Opportunities for Chainlink and Uniswap Protocol
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chainlink and Uniswap is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Uniswap Protocol Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uniswap Protocol Token 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 Uniswap Protocol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uniswap Protocol Token has no effect on the direction of Chainlink i.e., Chainlink and Uniswap Protocol go up and down completely randomly.
Pair Corralation between Chainlink and Uniswap Protocol
Assuming the 90 days trading horizon Chainlink is expected to generate 0.67 times more return on investment than Uniswap Protocol. However, Chainlink is 1.49 times less risky than Uniswap Protocol. It trades about 0.38 of its potential returns per unit of risk. Uniswap Protocol Token is currently generating about 0.25 per unit of risk. If you would invest 1,179 in Chainlink on August 27, 2024 and sell it today you would earn a total of 549.00 from holding Chainlink or generate 46.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chainlink vs. Uniswap Protocol Token
Performance |
| Timeline |
| Chainlink |
| Uniswap Protocol Token |
Chainlink and Uniswap Protocol Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and Uniswap Protocol
The main advantage of trading using opposite Chainlink and Uniswap Protocol positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Uniswap Protocol 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 Uniswap Protocol will offset losses from the drop in Uniswap Protocol's long position.The idea behind Chainlink and Uniswap Protocol Token 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.| Uniswap Protocol vs. Staked Ether | Uniswap Protocol vs. EigenLayer | Uniswap Protocol vs. EOSDAC | Uniswap Protocol vs. BLZ |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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