Correlation Between Wrapped EETH and RCN
Can any of the company-specific risk be diversified away by investing in both Wrapped EETH and RCN 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 Wrapped EETH and RCN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wrapped eETH and RCN, you can compare the effects of market volatilities on Wrapped EETH and RCN 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 Wrapped EETH with a short position of RCN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wrapped EETH and RCN.
Diversification Opportunities for Wrapped EETH and RCN
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Wrapped and RCN is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped eETH and RCN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCN and Wrapped EETH 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 Wrapped eETH are associated (or correlated) with RCN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCN has no effect on the direction of Wrapped EETH i.e., Wrapped EETH and RCN go up and down completely randomly.
Pair Corralation between Wrapped EETH and RCN
Assuming the 90 days trading horizon Wrapped EETH is expected to generate 4.04 times less return on investment than RCN. But when comparing it to its historical volatility, Wrapped eETH is 1.67 times less risky than RCN. It trades about 0.09 of its potential returns per unit of risk. RCN is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 0.14 in RCN on September 2, 2024 and sell it today you would lose (0.09) from holding RCN or give up 64.48% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 82.35% |
| Values | Daily Returns |
Wrapped eETH vs. RCN
Performance |
| Timeline |
| Wrapped eETH |
| RCN |
Wrapped EETH and RCN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wrapped EETH and RCN
The main advantage of trading using opposite Wrapped EETH and RCN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped EETH position performs unexpectedly, RCN 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 RCN will offset losses from the drop in RCN's long position.| Wrapped EETH vs. Wrapped Beacon ETH | Wrapped EETH vs. Staked Ether | Wrapped EETH vs. EigenLayer | Wrapped EETH vs. EOSDAC |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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