Correlation Between Aave and ARPA Chain

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

Diversification Opportunities for Aave and ARPA Chain

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Aave and ARPA Chain is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Aave and ARPA Chain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARPA Chain 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 ARPA Chain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARPA Chain has no effect on the direction of Aave i.e., Aave and ARPA Chain go up and down completely randomly.

Pair Corralation between Aave and ARPA Chain

Assuming the 90 days trading horizon Aave is expected to under-perform the ARPA Chain. In addition to that, Aave is 1.18 times more volatile than ARPA Chain. It trades about -0.12 of its total potential returns per unit of risk. ARPA Chain is currently generating about 0.03 per unit of volatility. If you would invest  3.81  in ARPA Chain on April 8, 2022 and sell it today you would lose (0.13)  from holding ARPA Chain or give up 3.41% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Aave  vs.  ARPA Chain

 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 August 2022. The current disturbance may also be a sign of long term up-swing for Aave investors.

Aave Price Channel

ARPA Chain 
ARPA Chain Performance
0 of 100
Over the last 90 days ARPA Chain 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 August 2022. The current disturbance may also be a sign of long term up-swing for ARPA Chain investors.

ARPA Chain Price Channel

Aave and ARPA Chain Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Aave and ARPA Chain

The main advantage of trading using opposite Aave and ARPA Chain positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, ARPA Chain 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 ARPA Chain will offset losses from the drop in ARPA Chain's long position.
The idea behind Aave and ARPA Chain 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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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