Correlation Between Solana and FKX
Can any of the company-specific risk be diversified away by investing in both Solana and FKX 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 FKX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and FKX, you can compare the effects of market volatilities on Solana and FKX 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 FKX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and FKX.
Diversification Opportunities for Solana and FKX
No risk reduction
The 3 months correlation between Solana and FKX is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Solana and FKX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FKX 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 FKX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FKX has no effect on the direction of Solana i.e., Solana and FKX go up and down completely randomly.
Pair Corralation between Solana and FKX
Assuming the 90 days trading horizon Solana is expected to generate 1.2 times more return on investment than FKX. However, Solana is 1.2 times more volatile than FKX. It trades about 0.27 of its potential returns per unit of risk. FKX is currently generating about 0.25 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 Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Solana vs. FKX
Performance |
Timeline |
Solana |
FKX |
Solana and FKX Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Solana and FKX
The main advantage of trading using opposite Solana and FKX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, FKX 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 FKX will offset losses from the drop in FKX's long position.The idea behind Solana and FKX 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Other Complementary Tools
Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
Bonds Directory Find actively traded corporate debentures issued by US companies | |
Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
Portfolio Holdings Check your current holdings and cash postion to detemine if your portfolio needs rebalancing | |
Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |