Correlation Between Grayscale Ethereum and EDISON

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Can any of the company-specific risk be diversified away by investing in both Grayscale Ethereum and EDISON 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 EDISON into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grayscale Ethereum Mini and EDISON INTL 4125, you can compare the effects of market volatilities on Grayscale Ethereum and EDISON 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 EDISON. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Ethereum and EDISON.

Diversification Opportunities for Grayscale Ethereum and EDISON

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Grayscale and EDISON is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Ethereum Mini and EDISON INTL 4125 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EDISON INTL 4125 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 Mini are associated (or correlated) with EDISON. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EDISON INTL 4125 has no effect on the direction of Grayscale Ethereum i.e., Grayscale Ethereum and EDISON go up and down completely randomly.

Pair Corralation between Grayscale Ethereum and EDISON

Considering the 90-day investment horizon Grayscale Ethereum Mini is expected to generate 5.48 times more return on investment than EDISON. However, Grayscale Ethereum is 5.48 times more volatile than EDISON INTL 4125. It trades about 0.16 of its potential returns per unit of risk. EDISON INTL 4125 is currently generating about -0.05 per unit of risk. If you would invest  2,300  in Grayscale Ethereum Mini on September 2, 2024 and sell it today you would earn a total of  1,084  from holding Grayscale Ethereum Mini or generate 47.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy95.31%
ValuesDaily Returns

Grayscale Ethereum Mini  vs.  EDISON INTL 4125

 Performance 
       Timeline  
Grayscale Ethereum Mini 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Ethereum Mini are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Grayscale Ethereum demonstrated solid returns over the last few months and may actually be approaching a breakup point.
EDISON INTL 4125 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days EDISON INTL 4125 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EDISON is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Grayscale Ethereum and EDISON Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grayscale Ethereum and EDISON

The main advantage of trading using opposite Grayscale Ethereum and EDISON positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grayscale Ethereum position performs unexpectedly, EDISON 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 EDISON will offset losses from the drop in EDISON's long position.
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The idea behind Grayscale Ethereum Mini and EDISON INTL 4125 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.
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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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