Correlation Between Solana and Decentraland

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

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

Diversification Opportunities for Solana and Decentraland

0.47

Correlation Coefficient

Solana  Decentraland

Very weak diversification

The 3 months correlation between Solana and Decentraland is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Decentraland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decentraland 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 Decentraland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decentraland has no effect on the direction of Solana i.e., Solana and Decentraland go up and down completely randomly.

Pair Corralation between Solana and Decentraland

Assuming the 90 days trading horizon Solana is expected to generate 1.12 times more return on investment than Decentraland. However, Solana is 1.12 times more volatile than Decentraland. It trades about 0.15 of its potential returns per unit of risk. Decentraland is currently generating about 0.0 per unit of risk. If you would invest  2,146  in Solana on February 14, 2024 and sell it today you would earn a total of  12,145  from holding Solana or generate 565.94% return on investment over 90 days.

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

Solana  vs.  Decentraland

Solana

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 7 (%) 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.

Decentraland

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decentraland has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Decentraland shareholders.

Pair Trading with Solana and Decentraland

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

The idea behind Solana and Decentraland 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.