Correlation Between Wrapped EETH and Gold Fields

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

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

Diversification Opportunities for Wrapped EETH and Gold Fields

-0.52

Correlation Coefficient

Wrapped EETH  Gold Fields

Excellent diversification

The 3 months correlation between Wrapped and Gold is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped eETH and Goldfinch in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gold Fields 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 Gold Fields. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gold Fields has no effect on the direction of Wrapped EETH i.e., Wrapped EETH and Gold Fields go up and down completely randomly.

Pair Corralation between Wrapped EETH and Gold Fields

Assuming the 90 days trading horizon Wrapped eETH is expected to generate 0.62 times more return on investment than Gold Fields. However, Wrapped eETH is 1.61 times less risky than Gold Fields. It trades about 0.19 of its potential returns per unit of risk. Goldfinch is currently generating about 0.0 per unit of risk. If you would invest  255,818  in Wrapped eETH on September 3, 2024 and sell it today you would earn a total of  127,030  from holding Wrapped eETH or generate 49.66% return on investment over 90 days.

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

Wrapped eETH  vs.  Goldfinch

Wrapped eETH

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped eETH are ranked lower than 14 (%) 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.

Gold Fields

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Goldfinch has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward indicators, Gold Fields is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Wrapped EETH and Gold Fields

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

The idea behind Wrapped eETH and Goldfinch 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.