Correlation Between Alchemix and Aave

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

Diversification Opportunities for Alchemix and Aave

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Alchemix and Aave is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alchemix and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave and Alchemix 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 Alchemix are associated (or correlated) with Aave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aave has no effect on the direction of Alchemix i.e., Alchemix and Aave go up and down completely randomly.

Pair Corralation between Alchemix and Aave

Assuming the 90 days trading horizon Alchemix is expected to generate 5.79 times more return on investment than Aave. However, Alchemix is 5.79 times more volatile than Aave. It trades about 0.04 of its potential returns per unit of risk. Aave is currently generating about -0.05 per unit of risk. If you would invest  0.00  in Alchemix on February 24, 2022 and sell it today you would earn a total of  3,320  from holding Alchemix or generate 9.223372036854776E16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy30.27%
ValuesDaily Returns

Alchemix  vs.  Aave

 Performance (%) 
      Timeline 
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 
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

Alchemix and Aave Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Alchemix and Aave

The main advantage of trading using opposite Alchemix and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alchemix position performs unexpectedly, Aave 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 Aave will offset losses from the drop in Aave's long position.
The idea behind Alchemix and Aave 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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