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

0.74

Correlation Coefficient

Solana  Stellar

Poor diversification

The 3 months correlation between Solana and Stellar is 0.74. 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 under-perform the Stellar. In addition to that, Solana is 1.21 times more volatile than Stellar. It trades about -0.19 of its total potential returns per unit of risk. Stellar is currently generating about -0.17 per unit of volatility. If you would invest  13.00  in Stellar on January 20, 2024 and sell it today you would lose (2.00) from holding Stellar or give up 15.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Solana  vs.  Stellar

Solana

Risk-Adjusted Performance

15 of 100

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.

Stellar

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stellar are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Stellar may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.