Correlation Between Solana and Stellar
Can any of the company-specific risk be diversified away by investing in both Solana and Stellar 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 Stellar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and Stellar, you can compare the effects of market volatilities on Solana and Stellar 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 Stellar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and Stellar.
Diversification Opportunities for Solana and Stellar
Very poor diversification
The 3 months correlation between Solana and Stellar is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Stellar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stellar 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 Stellar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stellar has no effect on the direction of Solana i.e., Solana and Stellar go up and down completely randomly.
Pair Corralation between Solana and Stellar
Assuming the 90 days trading horizon Solana is expected to generate 2.0 times less return on investment than Stellar. But when comparing it to its historical volatility, Solana is 1.33 times less risky than Stellar. It trades about 0.09 of its potential returns per unit of risk. Stellar is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 11.00 in Stellar on August 24, 2024 and sell it today you would earn a total of 16.00 from holding Stellar or generate 145.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.25% |
| Values | Daily Returns |
Solana vs. Stellar
Performance |
| Timeline |
| Solana |
| Stellar |
Solana and Stellar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Solana and Stellar
The main advantage of trading using opposite Solana and Stellar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, Stellar 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 Stellar will offset losses from the drop in Stellar's long position.The idea behind Solana and Stellar 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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