Correlation Between Polkadot and Ethena

Can any of the company-specific risk be diversified away by investing in both Polkadot and Ethena 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 Polkadot and Ethena into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Polkadot and Ethena, you can compare the effects of market volatilities on Polkadot and Ethena 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 Polkadot with a short position of Ethena. Check out your portfolio center. Please also check ongoing floating volatility patterns of Polkadot and Ethena.

Diversification Opportunities for Polkadot and Ethena

0.97

Correlation Coefficient

Polkadot  Ethena

Almost no diversification

The 3 months correlation between Polkadot and Ethena is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Polkadot and Ethena in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethena and Polkadot 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 Polkadot are associated (or correlated) with Ethena. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethena has no effect on the direction of Polkadot i.e., Polkadot and Ethena go up and down completely randomly.

Pair Corralation between Polkadot and Ethena

Assuming the 90 days trading horizon Polkadot is expected to generate 0.56 times more return on investment than Ethena. However, Polkadot is 1.78 times less risky than Ethena. It trades about -0.13 of its potential returns per unit of risk. Ethena is currently generating about -0.12 per unit of risk. If you would invest  663.00  in Polkadot on December 30, 2024 and sell it today you would lose (259.00) from holding Polkadot or give up 39.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Polkadot  vs.  Ethena

Polkadot

Risk-Adjusted Performance

Very Weak

Over the last 90 days Polkadot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Polkadot shareholders.

Ethena

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ethena has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Ethena shareholders.

Pair Trading with Polkadot and Ethena

The main advantage of trading using opposite Polkadot and Ethena positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Polkadot position performs unexpectedly, Ethena 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 Ethena will offset losses from the drop in Ethena's long position.

The idea behind Polkadot and Ethena 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.