Correlation Between Aave and FileCoin
Can any of the company-specific risk be diversified away by investing in both Aave and FileCoin 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 FileCoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aave and FileCoin, you can compare the effects of market volatilities on Aave and FileCoin 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 FileCoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aave and FileCoin.
Diversification Opportunities for Aave and FileCoin
Very weak diversification
The 3 months correlation between Aave and FileCoin is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aave and FileCoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FileCoin 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 FileCoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FileCoin has no effect on the direction of Aave i.e., Aave and FileCoin go up and down completely randomly.
Pair Corralation between Aave and FileCoin
Assuming the 90 days trading horizon Aave is expected to under-perform the FileCoin. In addition to that, Aave is 1.34 times more volatile than FileCoin. It trades about -0.06 of its total potential returns per unit of risk. FileCoin is currently generating about -0.06 per unit of volatility. If you would invest 546.00 in FileCoin on October 23, 2024 and sell it today you would lose (46.00) from holding FileCoin or give up 8.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aave vs. FileCoin
Performance |
| Timeline |
| Aave |
| FileCoin |
Aave and FileCoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aave and FileCoin
The main advantage of trading using opposite Aave and FileCoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aave position performs unexpectedly, FileCoin 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 FileCoin will offset losses from the drop in FileCoin's long position.The idea behind Aave and FileCoin 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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