Correlation Between Chainlink and DLT

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

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

Diversification Opportunities for Chainlink and DLT

0.94

Correlation Coefficient

Chainlink  DLT

Almost no diversification

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

Pair Corralation between Chainlink and DLT

Assuming the 90 days trading horizon Chainlink is expected to under-perform the DLT. In addition to that, Chainlink is 2.31 times more volatile than DLT. It trades about -0.08 of its total potential returns per unit of risk. DLT is currently generating about -0.07 per unit of volatility. If you would invest  0.05  in DLT on December 30, 2024 and sell it today you would lose (0.01) from holding DLT or give up 11.78% 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.  DLT

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.

DLT

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Chainlink and DLT

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

The idea behind Chainlink and DLT 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.