Correlation Between Aave and Polygon Ecosystem

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

By analyzing existing cross correlation between Aave and Polygon Ecosystem Token, you can compare the effects of market volatilities on Aave and Polygon Ecosystem 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 Polygon Ecosystem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aave and Polygon Ecosystem.

Diversification Opportunities for Aave and Polygon Ecosystem

0.42

Correlation Coefficient

Aave  Polygon Ecosystem

Very weak diversification

The 3 months correlation between Aave and Polygon is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Aave and Polygon Ecosystem Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polygon Ecosystem Token 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 Polygon Ecosystem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polygon Ecosystem Token has no effect on the direction of Aave i.e., Aave and Polygon Ecosystem go up and down completely randomly.

Pair Corralation between Aave and Polygon Ecosystem

Assuming the 90 days trading horizon Aave is expected to generate 1.29 times more return on investment than Polygon Ecosystem. However, Aave is 1.29 times more volatile than Polygon Ecosystem Token. It trades about 0.04 of its potential returns per unit of risk. Polygon Ecosystem Token is currently generating about -0.16 per unit of risk. If you would invest  19,894  in Aave on November 28, 2024 and sell it today you would earn a total of  514.00  from holding Aave or generate 2.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aave  vs.  Polygon Ecosystem Token

Aave

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aave are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Aave exhibited solid returns over the last few months and may actually be approaching a breakup point.

Polygon Ecosystem Token

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polygon Ecosystem Token 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 essential indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Polygon Ecosystem Token shareholders.

Pair Trading with Aave and Polygon Ecosystem

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

The idea behind Aave and Polygon Ecosystem Token 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.