Correlation Between Illuvium and Aptos

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

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

Diversification Opportunities for Illuvium and Aptos

Weak diversification

The 3 months correlation between Illuvium and Aptos is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Illuvium and Aptos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptos and Illuvium 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 Illuvium are associated (or correlated) with Aptos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptos has no effect on the direction of Illuvium i.e., Illuvium and Aptos go up and down completely randomly.

Pair Corralation between Illuvium and Aptos

Assuming the 90 days trading horizon Illuvium is expected to generate 0.56 times more return on investment than Aptos. However, Illuvium is 1.77 times less risky than Aptos. It trades about -0.4 of its potential returns per unit of risk. Aptos is currently generating about -0.26 per unit of risk. If you would invest  4,469  in Illuvium on June 27, 2023 and sell it today you would lose (494.00) from holding Illuvium or give up 11.05% of portfolio value over 90 days.

Illuvium  vs.  Aptos

Illuvium

Illuvium Performance

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Over the last 90 days Illuvium 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 Illuvium shareholders.

Aptos

Aptos Performance

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Over the last 90 days Aptos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in October 2023. The latest tumult may also be a sign of longer-term up-swing for Aptos shareholders.

Pair Trading with Illuvium and Aptos

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

The idea behind Illuvium and Aptos 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.