Correlation Between Solana and VIDY

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

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

Diversification Opportunities for Solana and VIDY

-0.24

Correlation Coefficient

Solana  VIDY

Very good diversification

The 3 months correlation between Solana and VIDY is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Solana and VIDY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIDY 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 VIDY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIDY has no effect on the direction of Solana i.e., Solana and VIDY go up and down completely randomly.

Pair Corralation between Solana and VIDY

Assuming the 90 days trading horizon Solana is expected to generate 0.32 times more return on investment than VIDY. However, Solana is 3.08 times less risky than VIDY. It trades about 0.27 of its potential returns per unit of risk. VIDY is currently generating about 0.06 per unit of risk. If you would invest  12,752  in Solana on September 1, 2024 and sell it today you would earn a total of  11,511  from holding Solana or generate 90.27% return on investment over 90 days.

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

Solana  vs.  VIDY

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.

VIDY

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Solana and VIDY

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

The idea behind Solana and VIDY 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.