Correlation Between Terra and EOS

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

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

Diversification Opportunities for Terra and EOS

0.94

Correlation Coefficient

Terra  EOS

Almost no diversification

The 3 months correlation between Terra and EOS is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Terra and EOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOS and Terra 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 Terra are associated (or correlated) with EOS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EOS has no effect on the direction of Terra i.e., Terra and EOS go up and down completely randomly.

Pair Corralation between Terra and EOS

Assuming the 90 days trading horizon Terra is expected to under-perform the EOS. But the crypto coin apears to be less risky and, when comparing its historical volatility, Terra is 1.13 times less risky than EOS. The crypto coin trades about -0.14 of its potential returns per unit of risk. The EOS is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  81.00  in EOS on November 27, 2024 and sell it today you would lose (25.00) from holding EOS or give up 30.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Terra  vs.  EOS

Terra

Risk-Adjusted Performance

Very Weak

Over the last 90 days Terra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Terra shareholders.

EOS

Risk-Adjusted Performance

Very Weak

Over the last 90 days EOS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for EOS shareholders.

Pair Trading with Terra and EOS

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

The idea behind Terra and EOS 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.