Correlation Between Solana and Creditcoin
Can any of the company-specific risk be diversified away by investing in both Solana and Creditcoin 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 Solana and Creditcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and Creditcoin, you can compare the effects of market volatilities on Solana and Creditcoin 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 Solana with a short position of Creditcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and Creditcoin.
Diversification Opportunities for Solana and Creditcoin
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Solana and Creditcoin is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Creditcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Creditcoin and Solana 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 Solana are associated (or correlated) with Creditcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Creditcoin has no effect on the direction of Solana i.e., Solana and Creditcoin go up and down completely randomly.
Pair Corralation between Solana and Creditcoin
Assuming the 90 days trading horizon Solana is expected to generate 1.99 times more return on investment than Creditcoin. However, Solana is 1.99 times more volatile than Creditcoin. It trades about 0.07 of its potential returns per unit of risk. Creditcoin is currently generating about 0.05 per unit of risk. If you would invest 1,350 in Solana on August 27, 2024 and sell it today you would earn a total of 24,170 from holding Solana or generate 1790.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solana vs. Creditcoin
Performance |
| Timeline |
| Solana |
| Creditcoin |
Solana and Creditcoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solana and Creditcoin
The main advantage of trading using opposite Solana and Creditcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, Creditcoin 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 Creditcoin will offset losses from the drop in Creditcoin's long position.The idea behind Solana and Creditcoin 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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