Correlation Between AE and Arweave

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

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

Diversification Opportunities for AE and Arweave

0.67

Correlation Coefficient

AE  Arweave

Poor diversification

The 3 months correlation between AE and Arweave is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding AE and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave and AE 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 AE are associated (or correlated) with Arweave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arweave has no effect on the direction of AE i.e., AE and Arweave go up and down completely randomly.

Pair Corralation between AE and Arweave

Assuming the 90 days horizon AE is expected to generate 1.11 times more return on investment than Arweave. However, AE is 1.11 times more volatile than Arweave. It trades about 0.18 of its potential returns per unit of risk. Arweave is currently generating about 0.05 per unit of risk. If you would invest  2.88  in AE on September 12, 2024 and sell it today you would earn a total of  2.78  from holding AE or generate 96.53% return on investment over 90 days.

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

AE  vs.  Arweave

AE

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AE are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, AE exhibited solid returns over the last few months and may actually be approaching a breakup point.

Arweave

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with AE and Arweave

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

The idea behind AE and Arweave 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.