Correlation Between EigenLayer and EM

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

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

Diversification Opportunities for EigenLayer and EM

0.0

Correlation Coefficient

EigenLayer  EM

Pay attention - limited upside

The 3 months correlation between EigenLayer and EM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding EigenLayer and EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EM 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 EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EM has no effect on the direction of EigenLayer i.e., EigenLayer and EM go up and down completely randomly.

Pair Corralation between EigenLayer and EM

Assuming the 90 days trading horizon EigenLayer is expected to generate 10.57 times more return on investment than EM. However, EigenLayer is 10.57 times more volatile than EM. It trades about 0.09 of its potential returns per unit of risk. EM is currently generating about -0.08 per unit of risk. If you would invest  0.00  in EigenLayer on September 1, 2024 and sell it today you would earn a total of  363.00  from holding EigenLayer or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	98.48%
Values	Daily Returns

EigenLayer  vs.  EM

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.

EM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, EM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with EigenLayer and EM

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

The idea behind EigenLayer and EM 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.