Correlation Between Sandbox and Aave

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

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

Diversification Opportunities for Sandbox and Aave

0.94

Correlation Coefficient

Sandbox  Aave

Almost no diversification

The 3 months correlation between Sandbox and Aave is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The Sandbox and Aave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aave and Sandbox 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 The Sandbox 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 Sandbox i.e., Sandbox and Aave go up and down completely randomly.

Pair Corralation between Sandbox and Aave

Assuming the 90 days trading horizon The Sandbox is expected to under-perform the Aave. But the crypto coin apears to be less risky and, when comparing its historical volatility, The Sandbox is 1.09 times less risky than Aave. The crypto coin trades about -0.17 of its potential returns per unit of risk. The Aave is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  30,817  in Aave on December 30, 2024 and sell it today you would lose (14,127) from holding Aave or give up 45.84% of portfolio value over 90 days.

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

The Sandbox  vs.  Aave

Sandbox

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Sandbox 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 The Sandbox 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 Sandbox and Aave

The main advantage of trading using opposite Sandbox and Aave positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sandbox 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 The Sandbox 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.