Correlation Between Chainlink and Quant

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

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

Diversification Opportunities for Chainlink and Quant

0.54

Correlation Coefficient

Chainlink  Quant

Very weak diversification

The 3 months correlation between Chainlink and Quant is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Quant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quant 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 Quant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quant has no effect on the direction of Chainlink i.e., Chainlink and Quant go up and down completely randomly.

Pair Corralation between Chainlink and Quant

Assuming the 90 days trading horizon Chainlink is expected to under-perform the Quant. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.03 times less risky than Quant. The crypto coin trades about -0.22 of its potential returns per unit of risk. The Quant is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  12,410  in Quant on January 20, 2024 and sell it today you would lose (1,563) from holding Quant or give up 12.59% of portfolio value over 90 days.

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

Chainlink  vs.  Quant

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.

Quant

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Quant may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Chainlink and Quant

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

The idea behind Chainlink and Quant 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.