Correlation Between NYSE Composite and Eos Energy

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

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

Diversification Opportunities for NYSE Composite and Eos Energy

0.25

Correlation Coefficient

NYSE Composite  Eos Energy

Modest diversification

The 3 months correlation between NYSE and Eos is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Eos Energy Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eos Energy Enterprises and NYSE Composite 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 NYSE Composite are associated (or correlated) with Eos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eos Energy Enterprises has no effect on the direction of NYSE Composite i.e., NYSE Composite and Eos Energy go up and down completely randomly.

Pair Corralation between NYSE Composite and Eos Energy

Assuming the 90 days trading horizon NYSE Composite is expected to generate 2.43 times less return on investment than Eos Energy. But when comparing it to its historical volatility, NYSE Composite is 9.28 times less risky than Eos Energy. It trades about 0.12 of its potential returns per unit of risk. Eos Energy Enterprises is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  267.00  in Eos Energy Enterprises on August 30, 2024 and sell it today you would earn a total of  3.00  from holding Eos Energy Enterprises or generate 1.12% return on investment over 90 days.

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

NYSE Composite  vs.  Eos Energy Enterprises

Pair Trading with NYSE Composite and Eos Energy

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

The idea behind NYSE Composite and Eos Energy Enterprises 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.