Correlation Between Axie Infinity and Aave

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

Diversification Opportunities for Axie Infinity and Aave

0.88
  Correlation Coefficient

Very poor diversification

The 13 months correlation between Axie Infinity and Aave is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Axie Infinity Shards and Aave in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Aave and Axie Infinity 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 Axie Infinity Shards 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 Axie Infinity i.e., Axie Infinity and Aave go up and down completely randomly.

Pair Corralation between Axie Infinity and Aave

Assuming the 90 days trading horizon Axie Infinity Shards is expected to under-perform the Aave. In addition to that, Axie Infinity is 1.02 times more volatile than Aave. It trades about -0.38 of its total potential returns per unit of risk. Aave is currently generating about -0.37 per unit of volatility. If you would invest  18,305  in Aave on February 15, 2022 and sell it today you would lose (9,657)  from holding Aave or give up 52.76% of portfolio value over 90 days.
Time Period13 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Axie Infinity Shards  vs.  Aave

 Performance (%) 
      Timeline 
Axie Infinity Shards 
Axie Infinity Performance
0 of 100
Over the last 90 days Axie Infinity Shards 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 Axie Infinity Shards investors.

Axie Infinity 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 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

Axie Infinity and Aave Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Axie Infinity and Aave

The main advantage of trading using opposite Axie Infinity and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Axie Infinity 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 Axie Infinity Shards 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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