Correlation Between Solana and Chainflip

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

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

Diversification Opportunities for Solana and Chainflip

0.55

Correlation Coefficient

Solana  Chainflip

Very weak diversification

The 3 months correlation between Solana and Chainflip is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Chainflip in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chainflip 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 Chainflip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chainflip has no effect on the direction of Solana i.e., Solana and Chainflip go up and down completely randomly.

Pair Corralation between Solana and Chainflip

Assuming the 90 days trading horizon Solana is expected to generate 3.08 times more return on investment than Chainflip. However, Solana is 3.08 times more volatile than Chainflip. It trades about 0.07 of its potential returns per unit of risk. Chainflip is currently generating about 0.01 per unit of risk. If you would invest  1,343  in Solana on September 25, 2024 and sell it today you would earn a total of  18,323  from holding Solana or generate 1364.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.17%
Values	Daily Returns

Solana  vs.  Chainflip

Solana

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 8 (%) 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.

Chainflip

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chainflip are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Chainflip exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solana and Chainflip

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

The idea behind Solana and Chainflip 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 Valuation module to check real value of public entities based on technical and fundamental data.