Correlation Between STEEMD and EOS

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

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

Diversification Opportunities for STEEMD and EOS

0.8

Correlation Coefficient

STEEMD  EOS

Very poor diversification

The 3 months correlation between STEEMD and EOS is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding STEEMD and EOS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EOS and STEEMD 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 STEEMD 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 STEEMD i.e., STEEMD and EOS go up and down completely randomly.

Pair Corralation between STEEMD and EOS

Assuming the 90 days trading horizon STEEMD is expected to generate 5.5 times more return on investment than EOS. However, STEEMD is 5.5 times more volatile than EOS. It trades about 0.03 of its potential returns per unit of risk. EOS is currently generating about -0.07 per unit of risk. If you would invest  178.00  in STEEMD on December 30, 2024 and sell it today you would lose (151.00) from holding STEEMD or give up 84.83% of portfolio value over 90 days.

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

STEEMD  vs.  EOS

STEEMD

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in STEEMD are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady technical and fundamental indicators, STEEMD sustained solid returns over the last few months and may actually be approaching a breakup point.

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for EOS shareholders.

Pair Trading with STEEMD and EOS

The main advantage of trading using opposite STEEMD and EOS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if STEEMD 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 STEEMD 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.