Correlation Between EigenLayer and CREAM

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

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

Diversification Opportunities for EigenLayer and CREAM

-0.63

Correlation Coefficient

EigenLayer  CREAM

Excellent diversification

The 3 months correlation between EigenLayer and CREAM is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding EigenLayer and CREAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CREAM and EigenLayer 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 EigenLayer are associated (or correlated) with CREAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CREAM has no effect on the direction of EigenLayer i.e., EigenLayer and CREAM go up and down completely randomly.

Pair Corralation between EigenLayer and CREAM

Assuming the 90 days trading horizon EigenLayer is expected to generate 5.31 times more return on investment than CREAM. However, EigenLayer is 5.31 times more volatile than CREAM. It trades about 0.13 of its potential returns per unit of risk. CREAM is currently generating about 0.1 per unit of risk. If you would invest  0.00  in EigenLayer on September 3, 2024 and sell it today you would earn a total of  386.00  from holding EigenLayer or generate 9.223372036854776E16% return on investment over 90 days.

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

EigenLayer  vs.  CREAM

EigenLayer

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EigenLayer are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, EigenLayer exhibited solid returns over the last few months and may actually be approaching a breakup point.

CREAM

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with EigenLayer and CREAM

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

The idea behind EigenLayer and CREAM 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.