Correlation Between Solana and CREAM

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

By analyzing existing cross correlation between Solana and CREAM, you can compare the effects of market volatilities on Solana and CREAM 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 Solana with a short position of CREAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and CREAM.

Diversification Opportunities for Solana and CREAM

-0.48

Correlation Coefficient

Solana  CREAM

Very good diversification

The 3 months correlation between Solana and CREAM is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Solana and CREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREAM and Solana 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 Solana are associated (or correlated) with CREAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREAM has no effect on the direction of Solana i.e., Solana and CREAM go up and down completely randomly.

Pair Corralation between Solana and CREAM

Assuming the 90 days trading horizon Solana is expected to generate 1.11 times less return on investment than CREAM. But when comparing it to its historical volatility, Solana is 5.27 times less risky than CREAM. It trades about 0.27 of its potential returns per unit of risk. CREAM is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,847  in CREAM on September 1, 2024 and sell it today you would lose (776.00) from holding CREAM or give up 42.01% of portfolio value over 90 days.

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

Solana  vs.  CREAM

Solana

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Solana exhibited solid returns over the last few months and may actually be approaching a breakup point.

CREAM

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Solana and CREAM

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

The idea behind Solana and CREAM 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.