Correlation Between Cosmos and Arweave

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

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

Diversification Opportunities for Cosmos and Arweave

0.76

Correlation Coefficient

Cosmos  Arweave

Poor diversification

The 3 months correlation between Cosmos and Arweave is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave 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 Arweave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arweave has no effect on the direction of Cosmos i.e., Cosmos and Arweave go up and down completely randomly.

Pair Corralation between Cosmos and Arweave

Assuming the 90 days trading horizon Cosmos is expected to under-perform the Arweave. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cosmos is 1.83 times less risky than Arweave. The crypto coin trades about -0.01 of its potential returns per unit of risk. The Arweave is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  654.00  in Arweave on January 19, 2024 and sell it today you would earn a total of  1,813  from holding Arweave or generate 277.22% return on investment over 90 days.

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

Cosmos  vs.  Arweave

Cosmos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Cosmos shareholders.

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.

Pair Trading with Cosmos and Arweave

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

The idea behind Cosmos and Arweave 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.