Correlation Between ARK and Axie Infinity

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

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

Diversification Opportunities for ARK and Axie Infinity

0.87

Correlation Coefficient

ARK  Axie Infinity

Very poor diversification

The 3 months correlation between ARK and Axie is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding ARK and Axie Infinity Shards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axie Infinity Shards and ARK 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 ARK are associated (or correlated) with Axie Infinity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axie Infinity Shards has no effect on the direction of ARK i.e., ARK and Axie Infinity go up and down completely randomly.

Pair Corralation between ARK and Axie Infinity

Assuming the 90 days trading horizon ARK is expected to generate 0.98 times more return on investment than Axie Infinity. However, ARK is 1.02 times less risky than Axie Infinity. It trades about -0.2 of its potential returns per unit of risk. Axie Infinity Shards is currently generating about -0.25 per unit of risk. If you would invest  109.00  in ARK on January 26, 2024 and sell it today you would lose (28.00) from holding ARK or give up 25.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

ARK  vs.  Axie Infinity Shards

ARK

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ARK are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady forward-looking signals, ARK may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Axie Infinity Shards

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with ARK and Axie Infinity

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

The idea behind ARK and Axie Infinity Shards 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..