Correlation Between Chainlink and TRUE

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

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

Diversification Opportunities for Chainlink and TRUE

0.63

Correlation Coefficient

Chainlink  TRUE

Poor diversification

The 3 months correlation between Chainlink and TRUE is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and TRUE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRUE 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 TRUE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRUE has no effect on the direction of Chainlink i.e., Chainlink and TRUE go up and down completely randomly.

Pair Corralation between Chainlink and TRUE

Assuming the 90 days trading horizon Chainlink is expected to generate 3.15 times more return on investment than TRUE. However, Chainlink is 3.15 times more volatile than TRUE. It trades about 0.0 of its potential returns per unit of risk. TRUE is currently generating about -0.05 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.  TRUE

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.

TRUE

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRUE 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 TRUE shareholders.

Pair Trading with Chainlink and TRUE

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

The idea behind Chainlink and TRUE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.