Correlation Between Aave and Automata

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

Diversification Opportunities for Aave and Automata

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between Aave and Automata is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Aave and Automata in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automata 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 Automata. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automata has no effect on the direction of Aave i.e., Aave and Automata go up and down completely randomly.

Pair Corralation between Aave and Automata

Assuming the 90 days trading horizon Aave is expected to under-perform the Automata. In addition to that, Aave is 1.05 times more volatile than Automata. It trades about -0.12 of its total potential returns per unit of risk. Automata is currently generating about -0.12 per unit of volatility. If you would invest  23.00  in Automata on April 8, 2022 and sell it today you would lose (7.00)  from holding Automata or give up 30.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy90.91%
ValuesDaily Returns

Aave  vs.  Automata

 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

Automata 
Automata Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Automata are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Automata sustained solid returns over the last few months and may actually be approaching a breakup point.

Automata Price Channel

Aave and Automata Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Aave and Automata

The main advantage of trading using opposite Aave and Automata positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, Automata 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 Automata will offset losses from the drop in Automata's long position.
The idea behind Aave and Automata 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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