Correlation Between Eos Energy and ESS Tech

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

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

Diversification Opportunities for Eos Energy and ESS Tech

0.58

Correlation Coefficient

Eos Energy  ESS Tech

Very weak diversification

The 3 months correlation between Eos and ESS is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Eos Energy Enterprises and ESS Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESS Tech and Eos Energy 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 Eos Energy Enterprises are associated (or correlated) with ESS Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESS Tech has no effect on the direction of Eos Energy i.e., Eos Energy and ESS Tech go up and down completely randomly.

Pair Corralation between Eos Energy and ESS Tech

Given the investment horizon of 90 days Eos Energy Enterprises is expected to generate 0.78 times more return on investment than ESS Tech. However, Eos Energy Enterprises is 1.28 times less risky than ESS Tech. It trades about 0.08 of its potential returns per unit of risk. ESS Tech is currently generating about 0.02 per unit of risk. If you would invest  246.00  in Eos Energy Enterprises on September 2, 2024 and sell it today you would earn a total of  49.00  from holding Eos Energy Enterprises or generate 19.92% return on investment over 90 days.

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

Eos Energy Enterprises  vs.  ESS Tech

Eos Energy Enterprises

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eos Energy Enterprises are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Eos Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

ESS Tech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ESS Tech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, ESS Tech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Eos Energy and ESS Tech

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

The idea behind Eos Energy Enterprises and ESS Tech 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.