Correlation Between Arista Networks and EPlus

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

By analyzing existing cross correlation between Arista Networks and ePlus inc, you can compare the effects of market volatilities on Arista Networks and EPlus 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 Arista Networks with a short position of EPlus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arista Networks and EPlus.

Diversification Opportunities for Arista Networks and EPlus

-0.56

Correlation Coefficient

Arista Networks  EPlus

Excellent diversification

The 3 months correlation between Arista and EPlus is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Arista Networks and ePlus inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ePlus inc and Arista Networks 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 Arista Networks are associated (or correlated) with EPlus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ePlus inc has no effect on the direction of Arista Networks i.e., Arista Networks and EPlus go up and down completely randomly.

Pair Corralation between Arista Networks and EPlus

Given the investment horizon of 90 days Arista Networks is expected to generate 0.85 times more return on investment than EPlus. However, Arista Networks is 1.17 times less risky than EPlus. It trades about 0.17 of its potential returns per unit of risk. ePlus inc is currently generating about -0.07 per unit of risk. If you would invest  8,168  in Arista Networks on October 3, 2024 and sell it today you would earn a total of  2,885  from holding Arista Networks or generate 35.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Arista Networks  vs.  ePlus inc

Arista Networks

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arista Networks are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Arista Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

ePlus inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ePlus inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Arista Networks and EPlus

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

The idea behind Arista Networks and ePlus inc 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.