Correlation Between Solana and UTK
Can any of the company-specific risk be diversified away by investing in both Solana and UTK 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 UTK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and UTK, you can compare the effects of market volatilities on Solana and UTK 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 UTK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and UTK.
Diversification Opportunities for Solana and UTK
Excellent diversification
The 3 months correlation between Solana and UTK is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Solana and UTK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTK 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 UTK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTK has no effect on the direction of Solana i.e., Solana and UTK go up and down completely randomly.
Pair Corralation between Solana and UTK
Assuming the 90 days trading horizon Solana is expected to generate 0.72 times more return on investment than UTK. However, Solana is 1.4 times less risky than UTK. It trades about 0.38 of its potential returns per unit of risk. UTK is currently generating about 0.17 per unit of risk. If you would invest 17,707 in Solana on August 24, 2024 and sell it today you would earn a total of 8,000 from holding Solana or generate 45.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solana vs. UTK
Performance |
| Timeline |
| Solana |
| UTK |
Solana and UTK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solana and UTK
The main advantage of trading using opposite Solana and UTK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, UTK 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 UTK will offset losses from the drop in UTK's long position.The idea behind Solana and UTK 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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