Correlation Between Chainlink and KNC

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

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

Diversification Opportunities for Chainlink and KNC

0.61

Correlation Coefficient

Chainlink  KNC

Poor diversification

The 3 months correlation between Chainlink and KNC is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and KNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KNC 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 KNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KNC has no effect on the direction of Chainlink i.e., Chainlink and KNC go up and down completely randomly.

Pair Corralation between Chainlink and KNC

Assuming the 90 days trading horizon Chainlink is expected to generate 1.15 times more return on investment than KNC. However, Chainlink is 1.15 times more volatile than KNC. It trades about 0.0 of its potential returns per unit of risk. KNC is currently generating about -0.11 per unit of risk. If you would invest  1,826  in Chainlink on November 28, 2024 and sell it today you would lose (312.00) from holding Chainlink or give up 17.09% of portfolio value over 90 days.

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

Chainlink  vs.  KNC

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.

KNC

Risk-Adjusted Performance

Very Weak

Over the last 90 days KNC 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 March 2025. The latest tumult may also be a sign of longer-term up-swing for KNC shareholders.

Pair Trading with Chainlink and KNC

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

The idea behind Chainlink and KNC 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.