Correlation Between Aave and AC Milan

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

Diversification Opportunities for Aave and AC Milan

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Aave and AC Milan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Aave and AC Milan Fan Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AC Milan Fan 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 AC Milan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AC Milan Fan has no effect on the direction of Aave i.e., Aave and AC Milan go up and down completely randomly.

Pair Corralation between Aave and AC Milan

Assuming the 90 days trading horizon Aave is expected to under-perform the AC Milan. But the crypto coin apears to be less risky and, when comparing its historical volatility, Aave is 5.8 times less risky than AC Milan. The crypto coin trades about -0.05 of its potential returns per unit of risk. The AC Milan Fan is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.00  in AC Milan Fan on February 24, 2022 and sell it today you would earn a total of  383.00  from holding AC Milan Fan or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy30.21%
ValuesDaily Returns

Aave  vs.  AC Milan Fan Token

 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 somewhat strong basic indicators, Aave is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aave Price Channel

AC Milan Fan 
AC Milan Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in AC Milan Fan are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, AC Milan sustained solid returns over the last few months and may actually be approaching a breakup point.

AC Milan Price Channel

Aave and AC Milan Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Aave and AC Milan

The main advantage of trading using opposite Aave and AC Milan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, AC Milan 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 AC Milan will offset losses from the drop in AC Milan's long position.
The idea behind Aave and AC Milan Fan 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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