Correlation Between Chainlink and NEO

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

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

Diversification Opportunities for Chainlink and NEO

0.17

Correlation Coefficient

Chainlink  NEO

Average diversification

The 3 months correlation between Chainlink and NEO is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and NEO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEO 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 NEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEO has no effect on the direction of Chainlink i.e., Chainlink and NEO go up and down completely randomly.

Pair Corralation between Chainlink and NEO

Assuming the 90 days trading horizon Chainlink is expected to under-perform the NEO. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.81 times less risky than NEO. The crypto coin trades about -0.23 of its potential returns per unit of risk. The NEO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,491  in NEO on January 20, 2024 and sell it today you would earn a total of  373.00  from holding NEO or generate 25.02% return on investment over 90 days.

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

Chainlink  vs.  NEO

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.

NEO

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NEO are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, NEO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and NEO

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

The idea behind Chainlink and NEO 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.

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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.