Correlation Between Axie Infinity and Avalanche

Can any of the company-specific risk be diversified away by investing in both Axie Infinity and Avalanche 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 Avalanche 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 Avalanche, you can compare the effects of market volatilities on Axie Infinity and Avalanche 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 Avalanche. Check out your portfolio center. Please also check ongoing floating volatility patterns of Axie Infinity and Avalanche.

Diversification Opportunities for Axie Infinity and Avalanche

0.86

Correlation Coefficient

Axie Infinity  Avalanche

Very poor diversification

The 3 months correlation between Axie and Avalanche is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Axie Infinity Shards and Avalanche in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalanche 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 Avalanche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalanche has no effect on the direction of Axie Infinity i.e., Axie Infinity and Avalanche go up and down completely randomly.

Pair Corralation between Axie Infinity and Avalanche

Assuming the 90 days trading horizon Axie Infinity Shards is expected to generate 0.96 times more return on investment than Avalanche. However, Axie Infinity Shards is 1.04 times less risky than Avalanche. It trades about -0.28 of its potential returns per unit of risk. Avalanche is currently generating about -0.26 per unit of risk. If you would invest  1,141  in Axie Infinity Shards on January 25, 2024 and sell it today you would lose (371.00) from holding Axie Infinity Shards or give up 32.52% of portfolio value over 90 days.

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

Axie Infinity Shards  vs.  Avalanche

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.

Avalanche

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axie Infinity and Avalanche

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

The idea behind Axie Infinity Shards and Avalanche 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.