Correlation Between IOTA and AE

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

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

Diversification Opportunities for IOTA and AE

0.6

Correlation Coefficient

IOTA  AE

Poor diversification

The 3 months correlation between IOTA and AE is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding IOTA and AE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AE and IOTA 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 IOTA are associated (or correlated) with AE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AE has no effect on the direction of IOTA i.e., IOTA and AE go up and down completely randomly.

Pair Corralation between IOTA and AE

Assuming the 90 days trading horizon IOTA is expected to generate 0.72 times more return on investment than AE. However, IOTA is 1.39 times less risky than AE. It trades about 0.12 of its potential returns per unit of risk. AE is currently generating about -0.17 per unit of risk. If you would invest  16.00  in IOTA on April 16, 2025 and sell it today you would earn a total of  6.00  from holding IOTA or generate 37.5% return on investment over 90 days.

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

IOTA  vs.  AE

IOTA

Risk-Adjusted Performance

Modest

Over the last 90 days IOTA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak fundamental indicators, IOTA exhibited solid returns over the last few months and may actually be approaching a breakup point.

AE

Risk-Adjusted Performance

Very Weak

Over the last 90 days AE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in August 2025. The latest tumult may also be a sign of longer-term up-swing for AE shareholders.

Pair Trading with IOTA and AE

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

The idea behind IOTA and AE 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.