Correlation Between Cosmos and Aave

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

Diversification Opportunities for Cosmos and Aave

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cosmos and Aave is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave and Cosmos 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 Cosmos 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 Cosmos i.e., Cosmos and Aave go up and down completely randomly.

Pair Corralation between Cosmos and Aave

Assuming the 90 days trading horizon Cosmos is expected to under-perform the Aave. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cosmos is 1.07 times less risky than Aave. The crypto coin trades about -0.28 of its potential returns per unit of risk. The Aave is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  15,797  in Aave on February 23, 2022 and sell it today you would lose (6,678)  from holding Aave or give up 42.27% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Cosmos  vs.  Aave

 Performance (%) 
      Timeline 
Cosmos 
Cosmos Performance
0 of 100
Over the last 90 days Cosmos 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 Cosmos investors.

Cosmos 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 latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Aave investors.

Aave Price Channel

Cosmos and Aave Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Cosmos and Aave

The main advantage of trading using opposite Cosmos and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos 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 Cosmos 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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