Correlation Between Ethena and GFT
Can any of the company-specific risk be diversified away by investing in both Ethena and GFT 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 Ethena and GFT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethena and GFT, you can compare the effects of market volatilities on Ethena and GFT 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 Ethena with a short position of GFT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethena and GFT.
Diversification Opportunities for Ethena and GFT
Excellent diversification
The 3 months correlation between Ethena and GFT is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and GFT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GFT and Ethena 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 Ethena are associated (or correlated) with GFT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GFT has no effect on the direction of Ethena i.e., Ethena and GFT go up and down completely randomly.
Pair Corralation between Ethena and GFT
Assuming the 90 days trading horizon Ethena is expected to generate 0.95 times more return on investment than GFT. However, Ethena is 1.05 times less risky than GFT. It trades about 0.02 of its potential returns per unit of risk. GFT is currently generating about -0.04 per unit of risk. If you would invest 91.00 in Ethena on August 30, 2024 and sell it today you would lose (20.00) from holding Ethena or give up 21.98% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ethena vs. GFT
Performance |
| Timeline |
| Ethena |
| GFT |
Ethena and GFT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethena and GFT
The main advantage of trading using opposite Ethena and GFT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethena position performs unexpectedly, GFT 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 GFT will offset losses from the drop in GFT's long position.The idea behind Ethena and GFT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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