Correlation Between Basic Attention and Chainlink

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

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

Diversification Opportunities for Basic Attention and Chainlink

0.93

Correlation Coefficient

Basic Attention  Chainlink

Almost no diversification

The 3 months correlation between Basic and Chainlink is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Basic Attention Token and Chainlink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chainlink and Basic Attention 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 Basic Attention Token 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 Basic Attention i.e., Basic Attention and Chainlink go up and down completely randomly.

Pair Corralation between Basic Attention and Chainlink

Assuming the 90 days trading horizon Basic Attention Token is expected to generate 1.15 times more return on investment than Chainlink. However, Basic Attention is 1.15 times more volatile than Chainlink. It trades about 0.23 of its potential returns per unit of risk. Chainlink is currently generating about 0.23 per unit of risk. If you would invest  16.00  in Basic Attention Token on September 2, 2024 and sell it today you would earn a total of  16.00  from holding Basic Attention Token or generate 100.0% return on investment over 90 days.

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

Basic Attention Token  vs.  Chainlink

Basic Attention Token

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Attention Token are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Basic Attention exhibited solid returns over the last few months and may actually be approaching a breakup point.

Chainlink

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 17 (%) 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.

Pair Trading with Basic Attention and Chainlink

The main advantage of trading using opposite Basic Attention and Chainlink positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Attention 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 Basic Attention Token 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 Global Correlations module to find global opportunities by holding instruments from different markets.