Correlation Between IOTA and AEON

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

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

Diversification Opportunities for IOTA and AEON

0.79

Correlation Coefficient

IOTA  AEON

Poor diversification

The 3 months correlation between IOTA and AEON is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding IOTA and AEON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEON and IOTA 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 IOTA are associated (or correlated) with AEON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEON has no effect on the direction of IOTA i.e., IOTA and AEON go up and down completely randomly.

Pair Corralation between IOTA and AEON

Assuming the 90 days trading horizon IOTA is expected to under-perform the AEON. In addition to that, IOTA is 2.12 times more volatile than AEON. It trades about -0.09 of its total potential returns per unit of risk. AEON is currently generating about -0.03 per unit of volatility. If you would invest  23.00  in AEON on December 29, 2024 and sell it today you would lose (2.00) from holding AEON or give up 8.7% of portfolio value over 90 days.

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

IOTA  vs.  AEON

IOTA

Risk-Adjusted Performance

Very Weak

Over the last 90 days IOTA 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for IOTA shareholders.

AEON

Risk-Adjusted Performance

Very Weak

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

Pair Trading with IOTA and AEON

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

The idea behind IOTA and AEON 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.