Correlation Between Chainlink and Decentraland
Can any of the company-specific risk be diversified away by investing in both Chainlink and Decentraland 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 Decentraland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Decentraland, you can compare the effects of market volatilities on Chainlink and Decentraland 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 Decentraland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Decentraland.
Diversification Opportunities for Chainlink and Decentraland
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chainlink and Decentraland is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Decentraland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decentraland 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 Decentraland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decentraland has no effect on the direction of Chainlink i.e., Chainlink and Decentraland go up and down completely randomly.
Pair Corralation between Chainlink and Decentraland
Assuming the 90 days trading horizon Chainlink is expected to generate 1.02 times more return on investment than Decentraland. However, Chainlink is 1.02 times more volatile than Decentraland. It trades about 0.08 of its potential returns per unit of risk. Decentraland is currently generating about 0.01 per unit of risk. If you would invest 701.00 in Chainlink on January 20, 2024 and sell it today you would earn a total of 694.00 from holding Chainlink or generate 99.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chainlink vs. Decentraland
Performance |
| Timeline |
| Chainlink |
| Decentraland |
Chainlink and Decentraland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chainlink and Decentraland
The main advantage of trading using opposite Chainlink and Decentraland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Decentraland 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 Decentraland will offset losses from the drop in Decentraland's long position.The idea behind Chainlink and Decentraland 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.| Decentraland vs. Solana | Decentraland vs. XRP | Decentraland vs. The Open Network | Decentraland vs. Staked Ether |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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