Correlation Between Grayscale Ethereum and Grayscale Digital
Can any of the company-specific risk be diversified away by investing in both Grayscale Ethereum and Grayscale Digital 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 Grayscale Ethereum and Grayscale Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grayscale Ethereum Classic and Grayscale Digital Large, you can compare the effects of market volatilities on Grayscale Ethereum and Grayscale Digital 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 Grayscale Ethereum with a short position of Grayscale Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Ethereum and Grayscale Digital.
Diversification Opportunities for Grayscale Ethereum and Grayscale Digital
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Grayscale and Grayscale is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Ethereum Classic and Grayscale Digital Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Digital Large and Grayscale Ethereum 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 Grayscale Ethereum Classic are associated (or correlated) with Grayscale Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Digital Large has no effect on the direction of Grayscale Ethereum i.e., Grayscale Ethereum and Grayscale Digital go up and down completely randomly.
Pair Corralation between Grayscale Ethereum and Grayscale Digital
Given the investment horizon of 90 days Grayscale Ethereum is expected to generate 1.52 times less return on investment than Grayscale Digital. But when comparing it to its historical volatility, Grayscale Ethereum Classic is 1.03 times less risky than Grayscale Digital. It trades about 0.21 of its potential returns per unit of risk. Grayscale Digital Large is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest 1,851 in Grayscale Digital Large on September 2, 2024 and sell it today you would earn a total of 2,379 from holding Grayscale Digital Large or generate 128.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grayscale Ethereum Classic vs. Grayscale Digital Large
Performance |
| Timeline |
| Grayscale Ethereum |
| Grayscale Digital Large |
Grayscale Ethereum and Grayscale Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grayscale Ethereum and Grayscale Digital
The main advantage of trading using opposite Grayscale Ethereum and Grayscale Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grayscale Ethereum position performs unexpectedly, Grayscale Digital 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 Grayscale Digital will offset losses from the drop in Grayscale Digital's long position.| Grayscale Ethereum vs. Grayscale Bitcoin Cash | Grayscale Ethereum vs. Grayscale Litecoin Trust | Grayscale Ethereum vs. Grayscale Digital Large | Grayscale Ethereum vs. Grayscale Ethereum Trust |
| Grayscale Digital vs. Grayscale Litecoin Trust | Grayscale Digital vs. Grayscale Bitcoin Cash | Grayscale Digital vs. Grayscale Ethereum Trust | Grayscale Digital vs. Bitwise 10 Crypto |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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