Correlation Between BLZ and Aave

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

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

Diversification Opportunities for BLZ and Aave

0.67

Correlation Coefficient

BLZ  Aave

Poor diversification

The 3 months correlation between BLZ and Aave is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding BLZ and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave and BLZ 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 BLZ 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 BLZ i.e., BLZ and Aave go up and down completely randomly.

Pair Corralation between BLZ and Aave

Assuming the 90 days trading horizon BLZ is expected to generate 2.35 times more return on investment than Aave. However, BLZ is 2.35 times more volatile than Aave. It trades about 0.0 of its potential returns per unit of risk. Aave is currently generating about -0.12 per unit of risk. If you would invest  5.40  in BLZ on December 29, 2024 and sell it today you would lose (2.08) from holding BLZ or give up 38.52% of portfolio value over 90 days.

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

BLZ  vs.  Aave

BLZ

Risk-Adjusted Performance

Very Weak

Over the last 90 days BLZ has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BLZ is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with BLZ and Aave

The main advantage of trading using opposite BLZ and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BLZ 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 BLZ 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.

Check out your portfolio center.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.