Correlation Between Ethereum and STRAX
Can any of the company-specific risk be diversified away by investing in both Ethereum and STRAX 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 STRAX into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethereum and STRAX, you can compare the effects of market volatilities on Ethereum and STRAX 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 STRAX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethereum and STRAX.
Diversification Opportunities for Ethereum and STRAX
Poor diversification
The 3 months correlation between Ethereum and STRAX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and STRAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRAX 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 STRAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRAX has no effect on the direction of Ethereum i.e., Ethereum and STRAX go up and down completely randomly.
Pair Corralation between Ethereum and STRAX
Assuming the 90 days trading horizon Ethereum is expected to generate 1.02 times more return on investment than STRAX. However, Ethereum is 1.02 times more volatile than STRAX. It trades about 0.07 of its potential returns per unit of risk. STRAX is currently generating about -0.04 per unit of risk. If you would invest 124,113 in Ethereum on August 23, 2024 and sell it today you would earn a total of 212,497 from holding Ethereum or generate 171.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ethereum vs. STRAX
Performance |
| Timeline |
| Ethereum |
| STRAX |
Ethereum and STRAX Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethereum and STRAX
The main advantage of trading using opposite Ethereum and STRAX positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum position performs unexpectedly, STRAX 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 STRAX will offset losses from the drop in STRAX's long position.| Ethereum vs. Ethereum Classic | Ethereum vs. Ethereum PoW | Ethereum vs. Ethereum Name Service | Ethereum vs. Staked Ether |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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