Correlation Between EOS and ARK

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

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

Diversification Opportunities for EOS and ARK

0.75

Correlation Coefficient

EOS  ARK

Poor diversification

The 3 months correlation between EOS and ARK is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding EOS and ARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK and EOS 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 are associated (or correlated) with ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK has no effect on the direction of EOS i.e., EOS and ARK go up and down completely randomly.

Pair Corralation between EOS and ARK

Assuming the 90 days trading horizon EOS is expected to generate 1.72 times more return on investment than ARK. However, EOS is 1.72 times more volatile than ARK. It trades about 0.08 of its potential returns per unit of risk. ARK is currently generating about -0.14 per unit of risk. If you would invest  80.00  in EOS on September 25, 2024 and sell it today you would earn a total of  7.00  from holding EOS or generate 8.75% return on investment over 90 days.

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

EOS  vs.  ARK

EOS

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EOS are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, EOS exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARK

Risk-Adjusted Performance

7 of 100

OK

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

Pair Trading with EOS and ARK

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

The idea behind EOS and ARK 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.