Correlation Between Chainlink and ICON Project

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

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

Diversification Opportunities for Chainlink and ICON Project

0.56

Correlation Coefficient

Chainlink  ICON Project

Very weak diversification

The 3 months correlation between Chainlink and ICON is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and ICON Project in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ICON Project 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 ICON Project. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ICON Project has no effect on the direction of Chainlink i.e., Chainlink and ICON Project go up and down completely randomly.

Pair Corralation between Chainlink and ICON Project

Assuming the 90 days trading horizon Chainlink is expected to under-perform the ICON Project. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.44 times less risky than ICON Project. The crypto coin trades about -0.11 of its potential returns per unit of risk. The ICON Project is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  24.00  in ICON Project on January 21, 2024 and sell it today you would lose (1.00) from holding ICON Project or give up 4.17% of portfolio value over 90 days.

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

Chainlink  vs.  ICON Project

Chainlink

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Chainlink is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

ICON Project

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ICON Project are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ICON Project exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and ICON Project

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

The idea behind Chainlink and ICON Project 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.