Correlation Between Solana and COFI

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

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

Diversification Opportunities for Solana and COFI

-0.86

Correlation Coefficient

Solana  COFI

Pay attention - limited upside

The 3 months correlation between Solana and COFI is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Solana and COFI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COFI and Solana 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 Solana are associated (or correlated) with COFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COFI has no effect on the direction of Solana i.e., Solana and COFI go up and down completely randomly.

Pair Corralation between Solana and COFI

Assuming the 90 days trading horizon Solana is expected to generate 1.14 times more return on investment than COFI. However, Solana is 1.14 times more volatile than COFI. It trades about 0.27 of its potential returns per unit of risk. COFI is currently generating about -0.07 per unit of risk. If you would invest  12,752  in Solana on September 1, 2024 and sell it today you would earn a total of  11,511  from holding Solana or generate 90.27% return on investment over 90 days.

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

Solana  vs.  COFI

Solana

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Solana exhibited solid returns over the last few months and may actually be approaching a breakup point.

COFI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days COFI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for COFI shareholders.

Pair Trading with Solana and COFI

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

The idea behind Solana and COFI 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.