Correlation Between Chainlink and SEVEN WEST

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

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

Diversification Opportunities for Chainlink and SEVEN WEST

0.05

Correlation Coefficient

Chainlink  SEVEN WEST

Significant diversification

The 3 months correlation between Chainlink and SEVEN is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and SEVEN WEST MEDI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEVEN WEST MEDI 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 SEVEN WEST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEVEN WEST MEDI has no effect on the direction of Chainlink i.e., Chainlink and SEVEN WEST go up and down completely randomly.

Pair Corralation between Chainlink and SEVEN WEST

Assuming the 90 days trading horizon Chainlink is expected to under-perform the SEVEN WEST. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.29 times less risky than SEVEN WEST. The crypto coin trades about -0.23 of its potential returns per unit of risk. The SEVEN WEST MEDI is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  12.00  in SEVEN WEST MEDI on January 31, 2024 and sell it today you would earn a total of  2.00  from holding SEVEN WEST MEDI or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Chainlink  vs.  SEVEN WEST MEDI

Chainlink

Risk-Adjusted Performance

0 of 100

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 unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for Chainlink shareholders.

SEVEN WEST MEDI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEVEN WEST MEDI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Chainlink and SEVEN WEST

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

The idea behind Chainlink and SEVEN WEST MEDI 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.