Correlation Between Etherfi and EigenLayer
Can any of the company-specific risk be diversified away by investing in both Etherfi and EigenLayer 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 Etherfi and EigenLayer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Etherfi and EigenLayer, you can compare the effects of market volatilities on Etherfi and EigenLayer 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 Etherfi with a short position of EigenLayer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Etherfi and EigenLayer.
Diversification Opportunities for Etherfi and EigenLayer
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Etherfi and EigenLayer is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Etherfi and EigenLayer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EigenLayer and Etherfi 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 Etherfi are associated (or correlated) with EigenLayer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EigenLayer has no effect on the direction of Etherfi i.e., Etherfi and EigenLayer go up and down completely randomly.
Pair Corralation between Etherfi and EigenLayer
Assuming the 90 days trading horizon Etherfi is expected to generate 1.04 times more return on investment than EigenLayer. However, Etherfi is 1.04 times more volatile than EigenLayer. It trades about 0.13 of its potential returns per unit of risk. EigenLayer is currently generating about -0.06 per unit of risk. If you would invest 156.00 in Etherfi on August 24, 2024 and sell it today you would earn a total of 32.00 from holding Etherfi or generate 20.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Etherfi vs. EigenLayer
Performance |
| Timeline |
| Etherfi |
| EigenLayer |
Etherfi and EigenLayer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Etherfi and EigenLayer
The main advantage of trading using opposite Etherfi and EigenLayer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Etherfi position performs unexpectedly, EigenLayer 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 EigenLayer will offset losses from the drop in EigenLayer's long position.The idea behind Etherfi and EigenLayer 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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