Correlation Between Chainlink and Maker

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

Diversification Opportunities for Chainlink and Maker

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Chainlink and Maker is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Maker in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Maker 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 Maker. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Maker has no effect on the direction of Chainlink i.e., Chainlink and Maker go up and down completely randomly.

Pair Corralation between Chainlink and Maker

Assuming the 90 days trading horizon Chainlink is expected to generate 26.37 times less return on investment than Maker. But when comparing it to its historical volatility, Chainlink is 1.09 times less risky than Maker. It trades about 0.01 of its potential returns per unit of risk. Maker is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  217,632  in Maker on December 29, 2023 and sell it today you would earn a total of  115,609  from holding Maker or generate 53.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Chainlink  vs.  Maker

 Performance 
       Timeline  
Chainlink 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 7 (%) 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.
Maker 

Risk-Adjusted Performance

22 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Maker are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Maker exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chainlink and Maker Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chainlink and Maker

The main advantage of trading using opposite Chainlink and Maker positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chainlink position performs unexpectedly, Maker 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 Maker will offset losses from the drop in Maker's long position.
The idea behind Chainlink and Maker 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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