Correlation Between EOSDAC and Echelon Prime

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

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

Diversification Opportunities for EOSDAC and Echelon Prime

-0.08

Correlation Coefficient

EOSDAC  Echelon Prime

Good diversification

The 3 months correlation between EOSDAC and Echelon is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding EOSDAC and Echelon Prime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Echelon Prime and EOSDAC 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 EOSDAC are associated (or correlated) with Echelon Prime. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Echelon Prime has no effect on the direction of EOSDAC i.e., EOSDAC and Echelon Prime go up and down completely randomly.

Pair Corralation between EOSDAC and Echelon Prime

Assuming the 90 days trading horizon EOSDAC is expected to generate 0.54 times more return on investment than Echelon Prime. However, EOSDAC is 1.85 times less risky than Echelon Prime. It trades about 0.21 of its potential returns per unit of risk. Echelon Prime is currently generating about 0.01 per unit of risk. If you would invest  0.02  in EOSDAC on April 23, 2025 and sell it today you would earn a total of  0.01  from holding EOSDAC or generate 59.56% return on investment over 90 days.

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

EOSDAC  vs.  Echelon Prime

EOSDAC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in EOSDAC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, EOSDAC sustained solid returns over the last few months and may actually be approaching a breakup point.

Echelon Prime

Risk-Adjusted Performance

Very Weak

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

Pair Trading with EOSDAC and Echelon Prime

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

The idea behind EOSDAC and Echelon Prime 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.