Correlation Between Chainlink and Avalanche

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

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

Diversification Opportunities for Chainlink and Avalanche

0.78

Correlation Coefficient

Chainlink  Avalanche

Poor diversification

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

Pair Corralation between Chainlink and Avalanche

Assuming the 90 days trading horizon Chainlink is expected to under-perform the Avalanche. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.05 times less risky than Avalanche. The crypto coin trades about -0.06 of its potential returns per unit of risk. The Avalanche is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,828  in Avalanche on August 4, 2024 and sell it today you would lose (1,351) from holding Avalanche or give up 35.29% of portfolio value over 90 days.

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

Chainlink  vs.  Avalanche

Chainlink

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 4 (%) 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.

Avalanche

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and Avalanche

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

The idea behind Chainlink and Avalanche 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.