Correlation Between CVP and AE

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

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

Diversification Opportunities for CVP and AE

-0.88

Correlation Coefficient

CVP  AE

Pay attention - limited upside

The 3 months correlation between CVP and AE is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding CVP and AE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AE and CVP 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 CVP are associated (or correlated) with AE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AE has no effect on the direction of CVP i.e., CVP and AE go up and down completely randomly.

Pair Corralation between CVP and AE

Assuming the 90 days trading horizon CVP is expected to generate 16.52 times more return on investment than AE. However, CVP is 16.52 times more volatile than AE. It trades about 0.15 of its potential returns per unit of risk. AE is currently generating about -0.16 per unit of risk. If you would invest  1.61  in CVP on April 22, 2025 and sell it today you would earn a total of  109.39  from holding CVP or generate 6794.41% return on investment over 90 days.

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

CVP  vs.  AE

CVP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, CVP exhibited solid returns over the last few months and may actually be approaching a breakup point.

AE

Risk-Adjusted Performance

Very Weak

Over the last 90 days AE 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 August 2025. The latest tumult may also be a sign of longer-term up-swing for AE shareholders.

Pair Trading with CVP and AE

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

The idea behind CVP and AE 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.