Correlation Between Technology Select and EA Series

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

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

Diversification Opportunities for Technology Select and EA Series

0.87

Correlation Coefficient

Technology Select  EA Series

Very poor diversification

The 3 months correlation between Technology and SHOC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Technology Select Sector and EA Series Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EA Series Trust and Technology Select 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 Technology Select Sector are associated (or correlated) with EA Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EA Series Trust has no effect on the direction of Technology Select i.e., Technology Select and EA Series go up and down completely randomly.

Pair Corralation between Technology Select and EA Series

Considering the 90-day investment horizon Technology Select Sector is expected to under-perform the EA Series. But the etf apears to be less risky and, when comparing its historical volatility, Technology Select Sector is 3.36 times less risky than EA Series. The etf trades about -0.11 of its potential returns per unit of risk. The EA Series Trust is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,636  in EA Series Trust on December 29, 2024 and sell it today you would lose (652.00) from holding EA Series Trust or give up 14.06% of portfolio value over 90 days.

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

Technology Select Sector  vs.  EA Series Trust

Technology Select Sector

Risk-Adjusted Performance

Very Weak

Over the last 90 days Technology Select Sector has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Etf's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the ETF venture institutional investors.

EA Series Trust

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Technology Select and EA Series

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

The idea behind Technology Select Sector and EA Series Trust 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.