Correlation Between Chainlink and SWFTC

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

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

Diversification Opportunities for Chainlink and SWFTC

0.62

Correlation Coefficient

Chainlink  SWFTC

Poor diversification

The 3 months correlation between Chainlink and SWFTC is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and SWFTC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SWFTC 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 SWFTC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SWFTC has no effect on the direction of Chainlink i.e., Chainlink and SWFTC go up and down completely randomly.

Pair Corralation between Chainlink and SWFTC

Assuming the 90 days trading horizon Chainlink is expected to generate 0.78 times more return on investment than SWFTC. However, Chainlink is 1.28 times less risky than SWFTC. It trades about 0.09 of its potential returns per unit of risk. SWFTC is currently generating about -0.01 per unit of risk. If you would invest  1,506  in Chainlink on April 23, 2025 and sell it today you would earn a total of  334.00  from holding Chainlink or generate 22.18% return on investment over 90 days.

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

Chainlink  vs.  SWFTC

Chainlink

Risk-Adjusted Performance

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 fundamental indicators, Chainlink exhibited solid returns over the last few months and may actually be approaching a breakup point.

SWFTC

Risk-Adjusted Performance

Very Weak

Over the last 90 days SWFTC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, SWFTC is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Chainlink and SWFTC

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

The idea behind Chainlink and SWFTC 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.