Correlation Between Chainlink and Bitcoin
Can any of the company-specific risk be diversified away by investing in both Chainlink and Bitcoin 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 Chainlink and Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Bitcoin, you can compare the effects of market volatilities on Chainlink and Bitcoin 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 Chainlink with a short position of Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Bitcoin.
Diversification Opportunities for Chainlink and Bitcoin
Very weak diversification
The 3 months correlation between Chainlink and Bitcoin is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin and Chainlink 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 Chainlink are associated (or correlated) with Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of Chainlink i.e., Chainlink and Bitcoin go up and down completely randomly.
Pair Corralation between Chainlink and Bitcoin
Assuming the 90 days trading horizon Chainlink is expected to under-perform the Bitcoin. In addition to that, Chainlink is 1.51 times more volatile than Bitcoin. It trades about -0.23 of its total potential returns per unit of risk. Bitcoin is currently generating about -0.02 per unit of volatility. If you would invest 6,549,322 in Bitcoin on January 20, 2024 and sell it today you would lose (185,764) from holding Bitcoin or give up 2.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chainlink vs. Bitcoin
Performance |
| Timeline |
| Chainlink |
| Bitcoin |
Chainlink and Bitcoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and Bitcoin
The main advantage of trading using opposite Chainlink and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Bitcoin 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 Bitcoin will offset losses from the drop in Bitcoin's long position.The idea behind Chainlink and Bitcoin 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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