Correlation Between Arweave and PancakeSwap

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

By analyzing existing cross correlation between Arweave and PancakeSwap, you can compare the effects of market volatilities on Arweave and PancakeSwap 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 Arweave with a short position of PancakeSwap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arweave and PancakeSwap.

Diversification Opportunities for Arweave and PancakeSwap

0.88

Correlation Coefficient

Arweave  PancakeSwap

Very poor diversification

The 3 months correlation between Arweave and PancakeSwap is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Arweave and PancakeSwap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PancakeSwap and Arweave 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 Arweave are associated (or correlated) with PancakeSwap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PancakeSwap has no effect on the direction of Arweave i.e., Arweave and PancakeSwap go up and down completely randomly.

Pair Corralation between Arweave and PancakeSwap

Assuming the 90 days horizon Arweave is expected to generate 1.12 times more return on investment than PancakeSwap. However, Arweave is 1.12 times more volatile than PancakeSwap. It trades about -0.2 of its potential returns per unit of risk. PancakeSwap is currently generating about -0.26 per unit of risk. If you would invest  3,515  in Arweave on January 19, 2024 and sell it today you would lose (1,048) from holding Arweave or give up 29.82% of portfolio value over 90 days.

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

Arweave  vs.  PancakeSwap

Arweave

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arweave are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Arweave exhibited solid returns over the last few months and may actually be approaching a breakup point.

PancakeSwap

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PancakeSwap are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, PancakeSwap may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Arweave and PancakeSwap

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

The idea behind Arweave and PancakeSwap 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.