Correlation Between Solana and MDA
Can any of the company-specific risk be diversified away by investing in both Solana and MDA 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 MDA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and MDA, you can compare the effects of market volatilities on Solana and MDA 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 MDA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and MDA.
Diversification Opportunities for Solana and MDA
Very weak diversification
The 3 months correlation between Solana and MDA is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Solana and MDA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MDA 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 MDA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MDA has no effect on the direction of Solana i.e., Solana and MDA go up and down completely randomly.
Pair Corralation between Solana and MDA
Assuming the 90 days trading horizon Solana is expected to generate 1.91 times more return on investment than MDA. However, Solana is 1.91 times more volatile than MDA. It trades about 0.07 of its potential returns per unit of risk. MDA is currently generating about 0.06 per unit of risk. If you would invest 1,357 in Solana on August 30, 2024 and sell it today you would earn a total of 23,119 from holding Solana or generate 1703.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solana vs. MDA
Performance |
| Timeline |
| Solana |
| MDA |
Solana and MDA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solana and MDA
The main advantage of trading using opposite Solana and MDA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, MDA 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 MDA will offset losses from the drop in MDA's long position.The idea behind Solana and MDA 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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