Correlation Between Solana and CET

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

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

Diversification Opportunities for Solana and CET

0.78

Correlation Coefficient

Solana  CET

Poor diversification

The 3 months correlation between Solana and CET is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Solana and CET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CET 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 CET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CET has no effect on the direction of Solana i.e., Solana and CET go up and down completely randomly.

Pair Corralation between Solana and CET

Assuming the 90 days trading horizon Solana is expected to under-perform the CET. In addition to that, Solana is 1.62 times more volatile than CET. It trades about -0.22 of its total potential returns per unit of risk. CET is currently generating about 0.03 per unit of volatility. If you would invest  3.77  in CET on February 3, 2024 and sell it today you would earn a total of  0.03  from holding CET or generate 0.8% return on investment over 90 days.

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

Solana  vs.  CET

Solana

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 10 (%) 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.

CET

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CET are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CET exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solana and CET

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

The idea behind Solana and CET 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.