Correlation Between EOSDAC and MTA
Can any of the company-specific risk be diversified away by investing in both EOSDAC and MTA 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 EOSDAC and MTA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOSDAC and MTA, you can compare the effects of market volatilities on EOSDAC and MTA 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 EOSDAC with a short position of MTA. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOSDAC and MTA.
Diversification Opportunities for EOSDAC and MTA
Good diversification
The 3 months correlation between EOSDAC and MTA is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding EOSDAC and MTA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTA and EOSDAC 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 EOSDAC are associated (or correlated) with MTA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTA has no effect on the direction of EOSDAC i.e., EOSDAC and MTA go up and down completely randomly.
Pair Corralation between EOSDAC and MTA
Assuming the 90 days trading horizon EOSDAC is expected to generate 4.09 times less return on investment than MTA. But when comparing it to its historical volatility, EOSDAC is 4.03 times less risky than MTA. It trades about 0.13 of its potential returns per unit of risk. MTA is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2.98 in MTA on August 30, 2024 and sell it today you would earn a total of 0.27 from holding MTA or generate 9.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EOSDAC vs. MTA
Performance |
| Timeline |
| EOSDAC |
| MTA |
EOSDAC and MTA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOSDAC and MTA
The main advantage of trading using opposite EOSDAC and MTA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOSDAC position performs unexpectedly, MTA 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 MTA will offset losses from the drop in MTA's long position.The idea behind EOSDAC and MTA 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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