Correlation Between ApeCoin and Aave

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

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

Diversification Opportunities for ApeCoin and Aave

0.31

Correlation Coefficient

ApeCoin  Aave

Weak diversification

The 3 months correlation between ApeCoin and Aave is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding ApeCoin and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave and ApeCoin 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 ApeCoin are associated (or correlated) with Aave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aave has no effect on the direction of ApeCoin i.e., ApeCoin and Aave go up and down completely randomly.

Pair Corralation between ApeCoin and Aave

Assuming the 90 days trading horizon ApeCoin is expected to under-perform the Aave. But the crypto coin apears to be less risky and, when comparing its historical volatility, ApeCoin is 1.01 times less risky than Aave. The crypto coin trades about -0.12 of its potential returns per unit of risk. The Aave is currently generating about 0.04 of returns per unit of risk over similar time horizon. 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	Very Weak
Accuracy	100.0%
Values	Daily Returns

ApeCoin  vs.  Aave

ApeCoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days ApeCoin 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 technical and fundamental 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 ApeCoin shareholders.

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.

Pair Trading with ApeCoin and Aave

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

The idea behind ApeCoin and Aave 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.