Correlation Between Solana and Algorand

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

Diversification Opportunities for Solana and Algorand

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Solana and Algorand is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Algorand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algorand 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 Algorand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algorand has no effect on the direction of Solana i.e., Solana and Algorand go up and down completely randomly.

Pair Corralation between Solana and Algorand

Assuming the 90 days trading horizon Solana is expected to under-perform the Algorand. In addition to that, Solana is 1.3 times more volatile than Algorand. It trades about -0.01 of its total potential returns per unit of risk. Algorand is currently generating about 0.0 per unit of volatility. If you would invest  35.00  in Algorand on May 21, 2022 and sell it today you would lose (1.00)  from holding Algorand or give up 2.86% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Solana  vs.  Algorand

 Performance (%) 
       Timeline  
Solana 
Solana Performance
0 of 100
Over the last 90 days Solana has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Solana is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Solana Price Channel

Algorand 
Algorand Performance
0 of 100
Over the last 90 days Algorand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Crypto's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Algorand investors.

Algorand Price Channel

Solana and Algorand Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Solana and Algorand

The main advantage of trading using opposite Solana and Algorand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, Algorand 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 Algorand will offset losses from the drop in Algorand's long position.
The idea behind Solana and Algorand 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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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