Correlation Between Solana and Velo
Can any of the company-specific risk be diversified away by investing in both Solana and Velo 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 Velo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and Velo, you can compare the effects of market volatilities on Solana and Velo 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 Velo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and Velo.
Diversification Opportunities for Solana and Velo
Good diversification
The 3 months correlation between Solana and Velo is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Velo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Velo 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 Velo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Velo has no effect on the direction of Solana i.e., Solana and Velo go up and down completely randomly.
Pair Corralation between Solana and Velo
Assuming the 90 days trading horizon Solana is expected to generate 0.59 times more return on investment than Velo. However, Solana is 1.7 times less risky than Velo. It trades about 0.09 of its potential returns per unit of risk. Velo is currently generating about 0.03 per unit of risk. If you would invest 16,833 in Solana on August 27, 2024 and sell it today you would earn a total of 8,687 from holding Solana or generate 51.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Solana vs. Velo
Performance |
| Timeline |
| Solana |
| Velo |
Solana and Velo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solana and Velo
The main advantage of trading using opposite Solana and Velo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, Velo 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 Velo will offset losses from the drop in Velo's long position.The idea behind Solana and Velo 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.
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