Correlation Between Edgewater Wireless and Eddy Smart

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

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

Diversification Opportunities for Edgewater Wireless and Eddy Smart

-0.68

Correlation Coefficient

Edgewater Wireless  Eddy Smart

Excellent diversification

The 3 months correlation between Edgewater and Eddy is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Edgewater Wireless Systems and Eddy Smart Home in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eddy Smart Home and Edgewater Wireless 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 Edgewater Wireless Systems are associated (or correlated) with Eddy Smart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eddy Smart Home has no effect on the direction of Edgewater Wireless i.e., Edgewater Wireless and Eddy Smart go up and down completely randomly.

Pair Corralation between Edgewater Wireless and Eddy Smart

Assuming the 90 days horizon Edgewater Wireless Systems is expected to generate 3.08 times more return on investment than Eddy Smart. However, Edgewater Wireless is 3.08 times more volatile than Eddy Smart Home. It trades about 0.22 of its potential returns per unit of risk. Eddy Smart Home is currently generating about -0.18 per unit of risk. If you would invest  2.46  in Edgewater Wireless Systems on October 9, 2024 and sell it today you would earn a total of  3.04  from holding Edgewater Wireless Systems or generate 123.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.12%
Values	Daily Returns

Edgewater Wireless Systems  vs.  Eddy Smart Home

Edgewater Wireless

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewater Wireless Systems are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Edgewater Wireless reported solid returns over the last few months and may actually be approaching a breakup point.

Eddy Smart Home

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eddy Smart Home has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Edgewater Wireless and Eddy Smart

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

The idea behind Edgewater Wireless Systems and Eddy Smart Home 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.