Correlation Between Chainlink and COFI

Can any of the company-specific risk be diversified away by investing in both Chainlink and COFI 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 COFI into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Chainlink and COFI, you can compare the effects of market volatilities on Chainlink and COFI 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 COFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and COFI.

Diversification Opportunities for Chainlink and COFI

0.1

Correlation Coefficient

Chainlink  COFI

Average diversification

The 3 months correlation between Chainlink and COFI is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and COFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFI 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 COFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFI has no effect on the direction of Chainlink i.e., Chainlink and COFI go up and down completely randomly.

Pair Corralation between Chainlink and COFI

Assuming the 90 days trading horizon Chainlink is expected to under-perform the COFI. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.66 times less risky than COFI. The crypto coin trades about 0.0 of its potential returns per unit of risk. The COFI is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  0.04  in COFI on November 28, 2024 and sell it today you would lose (0.01) from holding COFI or give up 28.86% of portfolio value over 90 days.

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

Chainlink  vs.  COFI

Chainlink

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chainlink has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Chainlink is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

COFI

Risk-Adjusted Performance

Very Weak

Over the last 90 days COFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady fundamental indicators, COFI may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Chainlink and COFI

The main advantage of trading using opposite Chainlink and COFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, COFI 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 COFI will offset losses from the drop in COFI's long position.

The idea behind Chainlink and COFI 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.