Correlation Between Chainlink and SNM

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

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

Diversification Opportunities for Chainlink and SNM

0.75

Correlation Coefficient

Chainlink  SNM

Poor diversification

The 3 months correlation between Chainlink and SNM is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and SNM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNM 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 SNM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNM has no effect on the direction of Chainlink i.e., Chainlink and SNM go up and down completely randomly.

Pair Corralation between Chainlink and SNM

Assuming the 90 days trading horizon Chainlink is expected to under-perform the SNM. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.21 times less risky than SNM. The crypto coin trades about -0.08 of its potential returns per unit of risk. The SNM is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  0.17  in SNM on December 30, 2024 and sell it today you would lose (0.06) from holding SNM or give up 33.89% of portfolio value over 90 days.

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

Chainlink  vs.  SNM

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.

SNM

Risk-Adjusted Performance

Very Weak

Over the last 90 days SNM 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 primary 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 SNM shareholders.

Pair Trading with Chainlink and SNM

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

The idea behind Chainlink and SNM 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.