Correlation Between Aave and Decentralized Social
Can any of the company-specific risk be diversified away by investing in both Aave and Decentralized Social 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 Aave and Decentralized Social into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aave and Decentralized Social, you can compare the effects of market volatilities on Aave and Decentralized Social 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 Aave with a short position of Decentralized Social. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aave and Decentralized Social.
Diversification Opportunities for Aave and Decentralized Social
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aave and Decentralized is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Aave and Decentralized Social in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decentralized Social and Aave 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 Aave are associated (or correlated) with Decentralized Social. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decentralized Social has no effect on the direction of Aave i.e., Aave and Decentralized Social go up and down completely randomly.
Pair Corralation between Aave and Decentralized Social
Assuming the 90 days trading horizon Aave is expected to generate 0.75 times more return on investment than Decentralized Social. However, Aave is 1.33 times less risky than Decentralized Social. It trades about 0.06 of its potential returns per unit of risk. Decentralized Social is currently generating about 0.04 per unit of risk. If you would invest 8,769 in Aave on November 9, 2024 and sell it today you would earn a total of 15,593 from holding Aave or generate 177.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aave vs. Decentralized Social
Performance |
| Timeline |
| Aave |
| Decentralized Social |
Aave and Decentralized Social Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aave and Decentralized Social
The main advantage of trading using opposite Aave and Decentralized Social positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, Decentralized Social 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 Decentralized Social will offset losses from the drop in Decentralized Social's long position.The idea behind Aave and Decentralized Social 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.| Decentralized Social vs. Staked Ether | Decentralized Social vs. Phala Network | Decentralized Social vs. EigenLayer | Decentralized Social vs. EOSDAC |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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