Correlation Between 21Shares Aave and 21Shares Polkadot

Can any of the company-specific risk be diversified away by investing in both 21Shares Aave and 21Shares Polkadot 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 21Shares Aave and 21Shares Polkadot into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21Shares Aave ETP and 21Shares Polkadot ETP, you can compare the effects of market volatilities on 21Shares Aave and 21Shares Polkadot 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 21Shares Aave with a short position of 21Shares Polkadot. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21Shares Aave and 21Shares Polkadot.

Diversification Opportunities for 21Shares Aave and 21Shares Polkadot

0.66

Correlation Coefficient

21Shares Aave  21Shares Polkadot

Poor diversification

The 3 months correlation between 21Shares and 21Shares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding 21Shares Aave ETP and 21Shares Polkadot ETP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21Shares Polkadot ETP and 21Shares 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 21Shares Aave ETP are associated (or correlated) with 21Shares Polkadot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21Shares Polkadot ETP has no effect on the direction of 21Shares Aave i.e., 21Shares Aave and 21Shares Polkadot go up and down completely randomly.

Pair Corralation between 21Shares Aave and 21Shares Polkadot

Assuming the 90 days trading horizon 21Shares Aave ETP is expected to generate 1.02 times more return on investment than 21Shares Polkadot. However, 21Shares Aave is 1.02 times more volatile than 21Shares Polkadot ETP. It trades about 0.2 of its potential returns per unit of risk. 21Shares Polkadot ETP is currently generating about 0.15 per unit of risk. If you would invest  1,707  in 21Shares Aave ETP on October 22, 2024 and sell it today you would earn a total of  2,067  from holding 21Shares Aave ETP or generate 121.09% return on investment over 90 days.

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

21Shares Aave ETP  vs.  21Shares Polkadot ETP

21Shares Aave ETP

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Aave ETP are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 21Shares Aave sustained solid returns over the last few months and may actually be approaching a breakup point.

21Shares Polkadot ETP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Polkadot ETP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 21Shares Polkadot sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 21Shares Aave and 21Shares Polkadot

The main advantage of trading using opposite 21Shares Aave and 21Shares Polkadot positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21Shares Aave position performs unexpectedly, 21Shares Polkadot 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 21Shares Polkadot will offset losses from the drop in 21Shares Polkadot's long position.

The idea behind 21Shares Aave ETP and 21Shares Polkadot ETP 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.