Correlation Between Aave and AllianceBlock

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Can any of the company-specific risk be diversified away by investing in both Aave and AllianceBlock 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 Aave and AllianceBlock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aave and AllianceBlock, you can compare the effects of market volatilities on Aave and AllianceBlock 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 Aave with a short position of AllianceBlock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aave and AllianceBlock.

Diversification Opportunities for Aave and AllianceBlock

0.98
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Aave and AllianceBlock is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Aave and AllianceBlock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AllianceBlock and Aave 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 Aave are associated (or correlated) with AllianceBlock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AllianceBlock has no effect on the direction of Aave i.e., Aave and AllianceBlock go up and down completely randomly.

Pair Corralation between Aave and AllianceBlock

Assuming the 90 days trading horizon Aave is expected to generate 1.32 times more return on investment than AllianceBlock. However, Aave is 1.32 times more volatile than AllianceBlock. It trades about -0.15 of its potential returns per unit of risk. AllianceBlock is currently generating about -0.31 per unit of risk. If you would invest  14,102  in Aave on April 1, 2022 and sell it today you would lose (8,676)  from holding Aave or give up 61.52% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Aave  vs.  AllianceBlock

 Performance (%) 
      Timeline 
Aave 
Aave Performance
0 of 100
Over the last 90 days Aave has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for Aave investors.

Aave Price Channel

AllianceBlock 
AllianceBlock Performance
0 of 100
Over the last 90 days AllianceBlock has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's fundamental drivers remain somewhat strong which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long term up-swing for AllianceBlock investors.

AllianceBlock Price Channel

Aave and AllianceBlock Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Aave and AllianceBlock

The main advantage of trading using opposite Aave and AllianceBlock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, AllianceBlock 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 AllianceBlock will offset losses from the drop in AllianceBlock's long position.
The idea behind Aave and AllianceBlock 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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