Correlation Between Chainlink and DGD

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

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

Diversification Opportunities for Chainlink and DGD

0.94

Correlation Coefficient

Chainlink  DGD

Almost no diversification

The 3 months correlation between Chainlink and DGD is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and DGD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGD 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 DGD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGD has no effect on the direction of Chainlink i.e., Chainlink and DGD go up and down completely randomly.

Pair Corralation between Chainlink and DGD

Assuming the 90 days trading horizon Chainlink is expected to under-perform the DGD. In addition to that, Chainlink is 2.31 times more volatile than DGD. It trades about -0.08 of its total potential returns per unit of risk. DGD is currently generating about -0.07 per unit of volatility. If you would invest  102,731  in DGD on December 30, 2024 and sell it today you would lose (12,025) from holding DGD or give up 11.71% of portfolio value over 90 days.

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

Chainlink  vs.  DGD

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 unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Chainlink shareholders.

DGD

Risk-Adjusted Performance

Very Weak

Over the last 90 days DGD has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for DGD shareholders.

Pair Trading with Chainlink and DGD

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

The idea behind Chainlink and DGD 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.