Correlation Between Aave and Aragon

Can any of the company-specific risk be diversified away by investing in both Aave and Aragon 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 Aragon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aave and Aragon, you can compare the effects of market volatilities on Aave and Aragon 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 Aragon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aave and Aragon.

Diversification Opportunities for Aave and Aragon

0.83

Correlation Coefficient

Aave  Aragon

Very poor diversification

The 3 months correlation between Aave and Aragon is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aave and Aragon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aragon 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 Aragon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aragon has no effect on the direction of Aave i.e., Aave and Aragon go up and down completely randomly.

Pair Corralation between Aave and Aragon

Assuming the 90 days trading horizon Aave is expected to under-perform the Aragon. But the crypto coin apears to be less risky and, when comparing its historical volatility, Aave is 1.42 times less risky than Aragon. The crypto coin trades about -0.19 of its potential returns per unit of risk. The Aragon is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  910.00  in Aragon on January 25, 2024 and sell it today you would lose (96.00) from holding Aragon or give up 10.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Aave  vs.  Aragon

Aave

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aave are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aragon

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aragon are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aragon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aave and Aragon

The main advantage of trading using opposite Aave and Aragon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, Aragon 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 Aragon will offset losses from the drop in Aragon's long position.

The idea behind Aave and Aragon 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 the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.