Correlation Between EOSDAC and WETH
Can any of the company-specific risk be diversified away by investing in both EOSDAC and WETH 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 WETH into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EOSDAC and WETH, you can compare the effects of market volatilities on EOSDAC and WETH 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 WETH. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOSDAC and WETH.
Diversification Opportunities for EOSDAC and WETH
Very good diversification
The 3 months correlation between EOSDAC and WETH is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding EOSDAC and WETH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WETH 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 WETH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WETH has no effect on the direction of EOSDAC i.e., EOSDAC and WETH go up and down completely randomly.
Pair Corralation between EOSDAC and WETH
Assuming the 90 days trading horizon EOSDAC is expected to generate 1.73 times less return on investment than WETH. But when comparing it to its historical volatility, EOSDAC is 3.99 times less risky than WETH. It trades about 0.11 of its potential returns per unit of risk. WETH is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 149,870 in WETH on August 30, 2024 and sell it today you would lose (34,362) from holding WETH or give up 22.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EOSDAC vs. WETH
Performance |
| Timeline |
| EOSDAC |
| WETH |
EOSDAC and WETH Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EOSDAC and WETH
The main advantage of trading using opposite EOSDAC and WETH positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EOSDAC position performs unexpectedly, WETH 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 WETH will offset losses from the drop in WETH's long position.The idea behind EOSDAC and WETH 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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