Correlation Between Aave and Alchemix

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

Diversification Opportunities for Aave and Alchemix

0.49
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Aave and Alchemix is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Aave and Alchemix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alchemix 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 Alchemix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alchemix has no effect on the direction of Aave i.e., Aave and Alchemix go up and down completely randomly.

Pair Corralation between Aave and Alchemix

Assuming the 90 days trading horizon Aave is expected to under-perform the Alchemix. But the crypto coin apears to be less risky and, when comparing its historical volatility, Aave is 8.25 times less risky than Alchemix. The crypto coin trades about -0.07 of its potential returns per unit of risk. The Alchemix is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in Alchemix on February 20, 2022 and sell it today you would earn a total of  3,176  from holding Alchemix or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy59.3%
ValuesDaily Returns

Aave  vs.  Alchemix

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

Aave Price Channel

Alchemix 
Alchemix Performance
0 of 100
Over the last 90 days Alchemix 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 indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for Alchemix investors.

Alchemix Price Channel

Aave and Alchemix Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Aave and Alchemix

The main advantage of trading using opposite Aave and Alchemix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, Alchemix 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 Alchemix will offset losses from the drop in Alchemix's long position.
The idea behind Aave and Alchemix 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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