Correlation Between DATA and EGold

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

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

Diversification Opportunities for DATA and EGold

0.57

Correlation Coefficient

DATA  EGold

Very weak diversification

The 3 months correlation between DATA and EGold is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding DATA and eGold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on eGold and DATA 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 DATA are associated (or correlated) with EGold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of eGold has no effect on the direction of DATA i.e., DATA and EGold go up and down completely randomly.

Pair Corralation between DATA and EGold

Assuming the 90 days trading horizon DATA is expected to generate 1.3 times more return on investment than EGold. However, DATA is 1.3 times more volatile than eGold. It trades about 0.0 of its potential returns per unit of risk. eGold is currently generating about -0.15 per unit of risk. If you would invest  6.95  in DATA on January 30, 2024 and sell it today you would lose (0.69) from holding DATA or give up 9.93% of portfolio value over 90 days.

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

DATA  vs.  eGold

DATA

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DATA are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, DATA exhibited solid returns over the last few months and may actually be approaching a breakup point.

eGold

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days eGold has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for eGold shareholders.

Pair Trading with DATA and EGold

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

The idea behind DATA and eGold 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.