Correlation Between Cronos and Chainlink

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

By analyzing existing cross correlation between Cronos and Chainlink, you can compare the effects of market volatilities on Cronos and Chainlink 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 Cronos with a short position of Chainlink. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cronos and Chainlink.

Diversification Opportunities for Cronos and Chainlink

0.15

Correlation Coefficient

Cronos  Chainlink

Average diversification

The 3 months correlation between Cronos and Chainlink is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cronos and Chainlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chainlink and Cronos 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 Cronos are associated (or correlated) with Chainlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chainlink has no effect on the direction of Cronos i.e., Cronos and Chainlink go up and down completely randomly.

Pair Corralation between Cronos and Chainlink

Assuming the 90 days trading horizon Cronos is expected to under-perform the Chainlink. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cronos is 1.76 times less risky than Chainlink. The crypto coin trades about -0.1 of its potential returns per unit of risk. The Chainlink is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,083  in Chainlink on August 6, 2024 and sell it today you would earn a total of  35.00  from holding Chainlink or generate 3.23% return on investment over 90 days.

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

Cronos  vs.  Chainlink

Cronos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cronos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cronos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chainlink

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Chainlink exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cronos and Chainlink

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

The idea behind Cronos and Chainlink 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.