Correlation Between EOSDAC and NEM

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

By analyzing existing cross correlation between EOSDAC and NEM, you can compare the effects of market volatilities on EOSDAC and NEM 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 NEM. Check out your portfolio center. Please also check ongoing floating volatility patterns of EOSDAC and NEM.

Diversification Opportunities for EOSDAC and NEM

-0.11

Correlation Coefficient

EOSDAC  NEM

Good diversification

The 3 months correlation between EOSDAC and NEM is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding EOSDAC and NEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEM 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 NEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEM has no effect on the direction of EOSDAC i.e., EOSDAC and NEM go up and down completely randomly.

Pair Corralation between EOSDAC and NEM

Assuming the 90 days trading horizon EOSDAC is expected to generate 1.43 times more return on investment than NEM. However, EOSDAC is 1.43 times more volatile than NEM. It trades about -0.06 of its potential returns per unit of risk. NEM is currently generating about -0.19 per unit of risk. If you would invest  0.04  in EOSDAC on January 31, 2024 and sell it today you would lose (0.01) from holding EOSDAC or give up 15.99% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

EOSDAC  vs.  NEM

EOSDAC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EOSDAC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for EOSDAC investors.

NEM

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, NEM may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with EOSDAC and NEM

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

The idea behind EOSDAC and NEM 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.