Correlation Between Chainlink and REP

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

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

Diversification Opportunities for Chainlink and REP

-0.15

Correlation Coefficient

Chainlink  REP

Good diversification

The 3 months correlation between Chainlink and REP is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and REP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REP 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 REP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REP has no effect on the direction of Chainlink i.e., Chainlink and REP go up and down completely randomly.

Pair Corralation between Chainlink and REP

Assuming the 90 days trading horizon Chainlink is expected to under-perform the REP. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 2.06 times less risky than REP. The crypto coin trades about -0.08 of its potential returns per unit of risk. The REP is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  59.00  in REP on December 30, 2024 and sell it today you would earn a total of  3.00  from holding REP or generate 5.08% return on investment over 90 days.

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

Chainlink  vs.  REP

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.

REP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, REP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and REP

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

The idea behind Chainlink and REP 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.