Correlation Between EMERCOIN and STEPN

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

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

Diversification Opportunities for EMERCOIN and STEPN

0.39

Correlation Coefficient

EMERCOIN  STEPN

Weak diversification

The 3 months correlation between EMERCOIN and STEPN is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding EMERCOIN and STEPN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STEPN and EMERCOIN 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 EMERCOIN are associated (or correlated) with STEPN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STEPN has no effect on the direction of EMERCOIN i.e., EMERCOIN and STEPN go up and down completely randomly.

Pair Corralation between EMERCOIN and STEPN

Assuming the 90 days trading horizon EMERCOIN is expected to generate 4.25 times more return on investment than STEPN. However, EMERCOIN is 4.25 times more volatile than STEPN. It trades about 0.12 of its potential returns per unit of risk. STEPN is currently generating about 0.15 per unit of risk. If you would invest  0.61  in EMERCOIN on September 3, 2024 and sell it today you would earn a total of  0.07  from holding EMERCOIN or generate 12.1% return on investment over 90 days.

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

EMERCOIN  vs.  STEPN

EMERCOIN

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EMERCOIN are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental indicators, EMERCOIN demonstrated solid returns over the last few months and may actually be approaching a breakup point.

STEPN

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in STEPN are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, STEPN exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMERCOIN and STEPN

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

The idea behind EMERCOIN and STEPN 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.

Check out your portfolio center.

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 Transaction History module to view history of all your transactions and understand their impact on performance.