Correlation Between Arweave and AE
Can any of the company-specific risk be diversified away by investing in both Arweave and AE 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 Arweave and AE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arweave and AE, you can compare the effects of market volatilities on Arweave and AE 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 Arweave with a short position of AE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arweave and AE.
Diversification Opportunities for Arweave and AE
Very weak diversification
The 3 months correlation between Arweave and AE is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Arweave and AE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AE and Arweave 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 Arweave are associated (or correlated) with AE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AE has no effect on the direction of Arweave i.e., Arweave and AE go up and down completely randomly.
Pair Corralation between Arweave and AE
Assuming the 90 days horizon Arweave is expected to under-perform the AE. But the crypto coin apears to be less risky and, when comparing its historical volatility, Arweave is 1.24 times less risky than AE. The crypto coin trades about -0.01 of its potential returns per unit of risk. The AE is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2.63 in AE on August 28, 2024 and sell it today you would earn a total of 1.00 from holding AE or generate 38.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Arweave vs. AE
Performance |
| Timeline |
| Arweave |
| AE |
Arweave and AE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Arweave and AE
The main advantage of trading using opposite Arweave and AE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arweave position performs unexpectedly, AE 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 AE will offset losses from the drop in AE's long position.The idea behind Arweave and AE 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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