Correlation Between Biconomy and Aave

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

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

Diversification Opportunities for Biconomy and Aave

0.69

Correlation Coefficient

Biconomy  Aave

Poor diversification

The 3 months correlation between Biconomy and Aave is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Biconomy and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave and Biconomy 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 Biconomy 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 Biconomy i.e., Biconomy and Aave go up and down completely randomly.

Pair Corralation between Biconomy and Aave

Assuming the 90 days trading horizon Biconomy is expected to generate 0.98 times more return on investment than Aave. However, Biconomy is 1.02 times less risky than Aave. It trades about 0.16 of its potential returns per unit of risk. Aave is currently generating about 0.14 per unit of risk. If you would invest  22.00  in Biconomy on August 30, 2024 and sell it today you would earn a total of  15.00  from holding Biconomy or generate 68.18% return on investment over 90 days.

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

Biconomy  vs.  Aave

Biconomy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Biconomy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Biconomy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Aave

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aave are ranked lower than 11 (%) 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 Biconomy and Aave

The main advantage of trading using opposite Biconomy and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biconomy 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 Biconomy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.