Correlation Between Chainlink and Darling Ingredients

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

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

Diversification Opportunities for Chainlink and Darling Ingredients

-0.07

Correlation Coefficient

Chainlink  Darling Ingredients

Good diversification

The 3 months correlation between Chainlink and Darling is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Darling Ingredients in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darling Ingredients 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 Darling Ingredients. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darling Ingredients has no effect on the direction of Chainlink i.e., Chainlink and Darling Ingredients go up and down completely randomly.

Pair Corralation between Chainlink and Darling Ingredients

Assuming the 90 days trading horizon Chainlink is expected to under-perform the Darling Ingredients. In addition to that, Chainlink is 2.2 times more volatile than Darling Ingredients. It trades about -0.18 of its total potential returns per unit of risk. Darling Ingredients is currently generating about 0.02 per unit of volatility. If you would invest  4,367  in Darling Ingredients on January 31, 2024 and sell it today you would earn a total of  54.00  from holding Darling Ingredients or generate 1.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.62%
Values	Daily Returns

Chainlink  vs.  Darling Ingredients

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.

Darling Ingredients

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Darling Ingredients are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Darling Ingredients is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Chainlink and Darling Ingredients

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

The idea behind Chainlink and Darling Ingredients 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.