Correlation Between Ethena and NULS
Can any of the company-specific risk be diversified away by investing in both Ethena and NULS 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 NULS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethena and NULS, you can compare the effects of market volatilities on Ethena and NULS 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 NULS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethena and NULS.
Diversification Opportunities for Ethena and NULS
Very good diversification
The 3 months correlation between Ethena and NULS is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and NULS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NULS 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 NULS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NULS has no effect on the direction of Ethena i.e., Ethena and NULS go up and down completely randomly.
Pair Corralation between Ethena and NULS
Assuming the 90 days trading horizon Ethena is expected to generate 1.16 times more return on investment than NULS. However, Ethena is 1.16 times more volatile than NULS. It trades about 0.01 of its potential returns per unit of risk. NULS is currently generating about -0.02 per unit of risk. If you would invest 91.00 in Ethena on August 27, 2024 and sell it today you would lose (24.00) from holding Ethena or give up 26.37% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ethena vs. NULS
Performance |
| Timeline |
| Ethena |
| NULS |
Ethena and NULS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethena and NULS
The main advantage of trading using opposite Ethena and NULS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethena position performs unexpectedly, NULS 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 NULS will offset losses from the drop in NULS's long position.The idea behind Ethena and NULS 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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