Correlation Between Pendle and Arweave

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

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

Diversification Opportunities for Pendle and Arweave

-0.14

Correlation Coefficient

Pendle  Arweave

Good diversification

The 3 months correlation between Pendle and Arweave is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Pendle and Arweave in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arweave and Pendle 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 Pendle 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 Pendle i.e., Pendle and Arweave go up and down completely randomly.

Pair Corralation between Pendle and Arweave

Assuming the 90 days trading horizon Pendle is expected to generate 1.05 times more return on investment than Arweave. However, Pendle is 1.05 times more volatile than Arweave. It trades about 0.2 of its potential returns per unit of risk. Arweave is currently generating about 0.09 per unit of risk. If you would invest  285.00  in Pendle on September 2, 2024 and sell it today you would earn a total of  292.00  from holding Pendle or generate 102.46% return on investment over 90 days.

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

Pendle  vs.  Arweave

Pendle

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pendle are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Pendle sustained solid returns over the last few months and may actually be approaching a breakup point.

Arweave

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arweave are ranked lower than 6 (%) 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 Pendle and Arweave

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

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.