Correlation Between Wrapped EETH and COV

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

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

Diversification Opportunities for Wrapped EETH and COV

0.85

Correlation Coefficient

Wrapped EETH  COV

Very poor diversification

The 3 months correlation between Wrapped and COV is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped eETH and COV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COV and Wrapped EETH 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 Wrapped eETH are associated (or correlated) with COV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COV has no effect on the direction of Wrapped EETH i.e., Wrapped EETH and COV go up and down completely randomly.

Pair Corralation between Wrapped EETH and COV

Assuming the 90 days trading horizon Wrapped eETH is expected to under-perform the COV. In addition to that, Wrapped EETH is 1.45 times more volatile than COV. It trades about -0.2 of its total potential returns per unit of risk. COV is currently generating about -0.05 per unit of volatility. If you would invest  35.00  in COV on December 30, 2024 and sell it today you would lose (4.00) from holding COV or give up 11.43% of portfolio value over 90 days.

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

Wrapped eETH  vs.  COV

Wrapped eETH

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wrapped eETH 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 Wrapped eETH shareholders.

COV

Risk-Adjusted Performance

Very Weak

Over the last 90 days COV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for COV shareholders.

Pair Trading with Wrapped EETH and COV

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

The idea behind Wrapped eETH and COV 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.