Correlation Between Chainlink and Cronos

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

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

Diversification Opportunities for Chainlink and Cronos

0.88

Correlation Coefficient

Chainlink  Cronos

Very poor diversification

The 3 months correlation between Chainlink and Cronos is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Cronos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos has no effect on the direction of Chainlink i.e., Chainlink and Cronos go up and down completely randomly.

Pair Corralation between Chainlink and Cronos

Assuming the 90 days trading horizon Chainlink is expected to generate 1.86 times less return on investment than Cronos. But when comparing it to its historical volatility, Chainlink is 2.43 times less risky than Cronos. It trades about 0.2 of its potential returns per unit of risk. Cronos is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  8.12  in Cronos on August 30, 2024 and sell it today you would earn a total of  9.88  from holding Cronos or generate 121.67% return on investment over 90 days.

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

Chainlink  vs.  Cronos

Chainlink

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 15 (%) 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.

Cronos

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and Cronos

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

The idea behind Chainlink and Cronos 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.