Can any of the company-specific risk be diversified away by investing in both Eos Energy and Amprius Technologies 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 Eos Energy and Amprius Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eos Energy Enterprises and Amprius Technologies, you can compare the effects of market volatilities on Eos Energy and Amprius Technologies 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 Eos Energy with a short position of Amprius Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eos Energy and Amprius Technologies.
Diversification Opportunities for Eos Energy and Amprius Technologies
The 3 months correlation between Eos and Amprius is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises and Amprius Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amprius Technologies and Eos Energy 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 Eos Energy Enterprises are associated (or correlated) with Amprius Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amprius Technologies has no effect on the direction of Eos Energy i.e., Eos Energy and Amprius Technologies go up and down completely randomly.
Pair Corralation between Eos Energy and Amprius Technologies
Given the investment horizon of 90 days Eos Energy Enterprises is expected to under-perform the Amprius Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Eos Energy Enterprises is 1.57 times less risky than Amprius Technologies. The stock trades about -0.08 of its potential returns per unit of risk. The Amprius Technologies is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 273.00 in Amprius Technologies on September 10, 2023 and sell it today you would earn a total of 134.00 from holding Amprius Technologies or generate 49.08% return on investment over 90 days.
Over the last 90 days Eos Energy Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Amprius Technologies are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Amprius Technologies showed solid returns over the last few months and may actually be approaching a breakup point.
Eos Energy and Amprius Technologies Volatility Contrast
Predicted Return Density
Pair Trading with Eos Energy and Amprius Technologies
The main advantage of trading using opposite Eos Energy and Amprius Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eos Energy position performs unexpectedly, Amprius Technologies 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 Amprius Technologies will offset losses from the drop in Amprius Technologies' long position.
The idea behind Eos Energy Enterprises and Amprius Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Use Bollinger Bands indicator to analyze target price for a given investing horizon
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