Correlation Between Wrapped EETH and Wrapped Beacon

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

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

Diversification Opportunities for Wrapped EETH and Wrapped Beacon

1.0

Correlation Coefficient

Wrapped EETH  Wrapped Beacon

No risk reduction

The 3 months correlation between Wrapped and Wrapped is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped eETH and Wrapped Beacon ETH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wrapped Beacon ETH 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 Wrapped Beacon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wrapped Beacon ETH has no effect on the direction of Wrapped EETH i.e., Wrapped EETH and Wrapped Beacon go up and down completely randomly.

Pair Corralation between Wrapped EETH and Wrapped Beacon

Assuming the 90 days trading horizon Wrapped eETH is expected to generate 1.03 times more return on investment than Wrapped Beacon. However, Wrapped EETH is 1.03 times more volatile than Wrapped Beacon ETH. It trades about 0.28 of its potential returns per unit of risk. Wrapped Beacon ETH is currently generating about 0.27 per unit of risk. If you would invest  175,704  in Wrapped eETH on April 21, 2025 and sell it today you would earn a total of  209,211  from holding Wrapped eETH or generate 119.07% return on investment over 90 days.

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

Wrapped eETH  vs.  Wrapped Beacon ETH

Wrapped eETH

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped eETH are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Wrapped EETH exhibited solid returns over the last few months and may actually be approaching a breakup point.

Wrapped Beacon ETH

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped Beacon ETH are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Wrapped Beacon exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wrapped EETH and Wrapped Beacon

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

The idea behind Wrapped eETH and Wrapped Beacon ETH 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.