Correlation Between Ethereum and LifeSpeak
Can any of the company-specific risk be diversified away by investing in both Ethereum and LifeSpeak 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 Ethereum and LifeSpeak into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethereum and LifeSpeak, you can compare the effects of market volatilities on Ethereum and LifeSpeak 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 Ethereum with a short position of LifeSpeak. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethereum and LifeSpeak.
Diversification Opportunities for Ethereum and LifeSpeak
Pay attention - limited upside
The 3 months correlation between Ethereum and LifeSpeak is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and LifeSpeak in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LifeSpeak and 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 Ethereum are associated (or correlated) with LifeSpeak. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LifeSpeak has no effect on the direction of Ethereum i.e., Ethereum and LifeSpeak go up and down completely randomly.
Pair Corralation between Ethereum and LifeSpeak
Assuming the 90 days trading horizon Ethereum is expected to generate 0.95 times more return on investment than LifeSpeak. However, Ethereum is 1.06 times less risky than LifeSpeak. It trades about 0.09 of its potential returns per unit of risk. LifeSpeak is currently generating about -0.02 per unit of risk. If you would invest 245,036 in Ethereum on November 2, 2024 and sell it today you would earn a total of 80,779 from holding Ethereum or generate 32.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ethereum vs. LifeSpeak
Performance |
| Timeline |
| Ethereum |
| LifeSpeak |
Ethereum and LifeSpeak Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethereum and LifeSpeak
The main advantage of trading using opposite Ethereum and LifeSpeak positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum position performs unexpectedly, LifeSpeak 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 LifeSpeak will offset losses from the drop in LifeSpeak's long position.The idea behind Ethereum and LifeSpeak 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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