Correlation Between Aave and Sandbox

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

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

Diversification Opportunities for Aave and Sandbox

0.94

Correlation Coefficient

Aave  Sandbox

Almost no diversification

The 3 months correlation between Aave and Sandbox is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aave and The Sandbox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandbox 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 Sandbox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandbox has no effect on the direction of Aave i.e., Aave and Sandbox go up and down completely randomly.

Pair Corralation between Aave and Sandbox

Assuming the 90 days trading horizon Aave is expected to generate 1.09 times more return on investment than Sandbox. However, Aave is 1.09 times more volatile than The Sandbox. It trades about -0.13 of its potential returns per unit of risk. The Sandbox is currently generating about -0.17 per unit of risk. If you would invest  30,817  in Aave on December 30, 2024 and sell it today you would lose (14,127) from holding Aave or give up 45.84% of portfolio value over 90 days.

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

Aave  vs.  The Sandbox

Aave

Risk-Adjusted Performance

Very Weak

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

Sandbox

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Aave and Sandbox

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

The idea behind Aave and The Sandbox 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..