Correlation Between Chainlink and Solana

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Can any of the company-specific risk be diversified away by investing in both Chainlink and Solana 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 Solana into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Solana, you can compare the effects of market volatilities on Chainlink and Solana 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 Solana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Solana.

Diversification Opportunities for Chainlink and Solana

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between Chainlink and Solana is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Solana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solana 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 Solana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solana has no effect on the direction of Chainlink i.e., Chainlink and Solana go up and down completely randomly.

Pair Corralation between Chainlink and Solana

Assuming the 90 days trading horizon Chainlink is expected to under-perform the Solana. In addition to that, Chainlink is 1.07 times more volatile than Solana. It trades about -0.23 of its total potential returns per unit of risk. Solana is currently generating about -0.22 per unit of volatility. If you would invest  19,047  in Solana on January 23, 2024 and sell it today you would lose (3,919) from holding Solana or give up 20.58% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Chainlink  vs.  Solana

 Performance 
       Timeline  
Chainlink 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Chainlink may actually be approaching a critical reversion point that can send shares even higher in May 2024.
Solana 

Risk-Adjusted Performance

15 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Solana exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chainlink and Solana Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chainlink and Solana

The main advantage of trading using opposite Chainlink and Solana positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Solana 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 Solana will offset losses from the drop in Solana's long position.
The idea behind Chainlink and Solana 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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