Correlation Between Chainlink and Polkadot

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

Diversification Opportunities for Chainlink and Polkadot

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chainlink and Polkadot is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Polkadot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polkadot 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 Polkadot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polkadot has no effect on the direction of Chainlink i.e., Chainlink and Polkadot go up and down completely randomly.

Pair Corralation between Chainlink and Polkadot

Assuming the 90 days trading horizon Chainlink is expected to generate 1.01 times more return on investment than Polkadot. However, Chainlink is 1.01 times more volatile than Polkadot. It trades about -0.07 of its potential returns per unit of risk. Polkadot is currently generating about -0.09 per unit of risk. If you would invest  2,827  in Chainlink on May 9, 2022 and sell it today you would lose (2,041)  from holding Chainlink or give up 72.2% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chainlink  vs.  Polkadot

 Performance (%) 
       Timeline  
Chainlink 
Chainlink Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chainlink may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Chainlink Price Channel

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

Polkadot Price Channel

Chainlink and Polkadot Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chainlink and Polkadot

The main advantage of trading using opposite Chainlink and Polkadot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Polkadot 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 Polkadot will offset losses from the drop in Polkadot's long position.
The idea behind Chainlink and Polkadot 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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