Correlation Between Chainlink and Compound Governance

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Can any of the company-specific risk be diversified away by investing in both Chainlink and Compound Governance 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 Compound Governance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chainlink and Compound Governance Token, you can compare the effects of market volatilities on Chainlink and Compound Governance 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 Compound Governance. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chainlink and Compound Governance.

Diversification Opportunities for Chainlink and Compound Governance

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chainlink and Compound is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Compound Governance Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compound Governance Token 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 Compound Governance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compound Governance Token has no effect on the direction of Chainlink i.e., Chainlink and Compound Governance go up and down completely randomly.

Pair Corralation between Chainlink and Compound Governance

Assuming the 90 days trading horizon Chainlink is expected to generate 0.79 times more return on investment than Compound Governance. However, Chainlink is 1.27 times less risky than Compound Governance. It trades about 0.04 of its potential returns per unit of risk. Compound Governance Token is currently generating about 0.02 per unit of risk. If you would invest  1,397  in Chainlink on December 30, 2023 and sell it today you would earn a total of  523.00  from holding Chainlink or generate 37.44% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Chainlink  vs.  Compound Governance Token

 Performance 
       Timeline  
Chainlink 

Risk-Adjusted Performance

9 of 100

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

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Compound Governance Token are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Compound Governance exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chainlink and Compound Governance Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chainlink and Compound Governance

The main advantage of trading using opposite Chainlink and Compound Governance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Compound Governance 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 Compound Governance will offset losses from the drop in Compound Governance's long position.
The idea behind Chainlink and Compound Governance Token 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.

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