Correlation Between Chainlink and Lido DAO

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

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

Diversification Opportunities for Chainlink and Lido DAO

0.83

Correlation Coefficient

Chainlink  Lido DAO

Very poor diversification

The 3 months correlation between Chainlink and Lido is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Chainlink and Lido DAO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lido DAO 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 Lido DAO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lido DAO has no effect on the direction of Chainlink i.e., Chainlink and Lido DAO go up and down completely randomly.

Pair Corralation between Chainlink and Lido DAO

Assuming the 90 days trading horizon Chainlink is expected to generate 1.12 times less return on investment than Lido DAO. But when comparing it to its historical volatility, Chainlink is 1.62 times less risky than Lido DAO. It trades about 0.23 of its potential returns per unit of risk. Lido DAO is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  99.00  in Lido DAO on September 1, 2024 and sell it today you would earn a total of  82.00  from holding Lido DAO or generate 82.83% return on investment over 90 days.

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

Chainlink  vs.  Lido DAO

Chainlink

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chainlink are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Chainlink exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lido DAO

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Lido DAO are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Lido DAO exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Chainlink and Lido DAO

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

The idea behind Chainlink and Lido DAO 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..