Correlation Between EigenLayer and Chroma
Can any of the company-specific risk be diversified away by investing in both EigenLayer and Chroma 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 EigenLayer and Chroma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EigenLayer and Chroma, you can compare the effects of market volatilities on EigenLayer and Chroma 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 EigenLayer with a short position of Chroma. Check out your portfolio center. Please also check ongoing floating volatility patterns of EigenLayer and Chroma.
Diversification Opportunities for EigenLayer and Chroma
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between EigenLayer and Chroma is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding EigenLayer and Chroma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chroma and EigenLayer 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 EigenLayer are associated (or correlated) with Chroma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chroma has no effect on the direction of EigenLayer i.e., EigenLayer and Chroma go up and down completely randomly.
Pair Corralation between EigenLayer and Chroma
Assuming the 90 days trading horizon EigenLayer is expected to generate 2.31 times less return on investment than Chroma. In addition to that, EigenLayer is 1.57 times more volatile than Chroma. It trades about 0.09 of its total potential returns per unit of risk. Chroma is currently generating about 0.34 per unit of volatility. If you would invest 17.00 in Chroma on August 28, 2024 and sell it today you would earn a total of 8.00 from holding Chroma or generate 47.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EigenLayer vs. Chroma
Performance |
| Timeline |
| EigenLayer |
| Chroma |
EigenLayer and Chroma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EigenLayer and Chroma
The main advantage of trading using opposite EigenLayer and Chroma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EigenLayer position performs unexpectedly, Chroma 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 Chroma will offset losses from the drop in Chroma's long position.The idea behind EigenLayer and Chroma 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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