Correlation Between Basic Attention and EM

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

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

Diversification Opportunities for Basic Attention and EM

0.0

Correlation Coefficient

Basic Attention  EM

Pay attention - limited upside

The 3 months correlation between Basic and EM is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Basic Attention Token and EM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EM and Basic Attention 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 Basic Attention Token are associated (or correlated) with EM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EM has no effect on the direction of Basic Attention i.e., Basic Attention and EM go up and down completely randomly.

Pair Corralation between Basic Attention and EM

Assuming the 90 days trading horizon Basic Attention Token is expected to generate 0.93 times more return on investment than EM. However, Basic Attention Token is 1.08 times less risky than EM. It trades about 0.02 of its potential returns per unit of risk. EM is currently generating about -0.04 per unit of risk. If you would invest  21.00  in Basic Attention Token on April 20, 2025 and sell it today you would lose (5.00) from holding Basic Attention Token or give up 23.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Basic Attention Token  vs.  EM

Basic Attention Token

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Basic Attention Token are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Basic Attention exhibited solid returns over the last few months and may actually be approaching a breakup point.

EM

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Basic Attention and EM

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

The idea behind Basic Attention Token and EM 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.