Correlation Between Chainlink and REN

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

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

Diversification Opportunities for Chainlink and REN

0.61

Correlation Coefficient

Chainlink  REN

Poor diversification

The 3 months correlation between Chainlink and REN is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and REN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REN 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 REN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REN has no effect on the direction of Chainlink i.e., Chainlink and REN go up and down completely randomly.

Pair Corralation between Chainlink and REN

Assuming the 90 days trading horizon Chainlink is expected to under-perform the REN. But the crypto coin apears to be less risky and, when comparing its historical volatility, Chainlink is 1.9 times less risky than REN. The crypto coin trades about -0.27 of its potential returns per unit of risk. The REN is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  8.82  in REN on January 19, 2024 and sell it today you would lose (2.89) from holding REN or give up 32.77% of portfolio value over 90 days.

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

Chainlink  vs.  REN

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 latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Chainlink shareholders.

REN

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REN are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, REN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and REN

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

The idea behind Chainlink and REN 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.