Correlation Between True USD and Chainlink

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

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

Diversification Opportunities for True USD and Chainlink

-0.03

Correlation Coefficient

True USD  Chainlink

Good diversification

The 3 months correlation between True and Chainlink is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding True USD and Chainlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chainlink and True USD 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 True USD are associated (or correlated) with Chainlink. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chainlink has no effect on the direction of True USD i.e., True USD and Chainlink go up and down completely randomly.

Pair Corralation between True USD and Chainlink

Assuming the 90 days trading horizon True USD is expected to generate 0.09 times more return on investment than Chainlink. However, True USD is 11.23 times less risky than Chainlink. It trades about -0.21 of its potential returns per unit of risk. Chainlink is currently generating about -0.22 per unit of risk. If you would invest  102.00  in True USD on January 24, 2024 and sell it today you would lose (2.00) from holding True USD or give up 1.96% of portfolio value over 90 days.

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

True USD  vs.  Chainlink

True USD

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in True USD are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, True USD is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Chainlink

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 4 (%) 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.

Pair Trading with True USD and Chainlink

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

The idea behind True USD and Chainlink 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.