Correlation Between Ethena and ATP

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

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

Diversification Opportunities for Ethena and ATP

-0.68

Correlation Coefficient

Ethena  ATP

Excellent diversification

The 3 months correlation between Ethena and ATP is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and ATP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATP and Ethena 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 Ethena are associated (or correlated) with ATP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATP has no effect on the direction of Ethena i.e., Ethena and ATP go up and down completely randomly.

Pair Corralation between Ethena and ATP

Assuming the 90 days trading horizon Ethena is expected to generate 0.97 times more return on investment than ATP. However, Ethena is 1.03 times less risky than ATP. It trades about 0.22 of its potential returns per unit of risk. ATP is currently generating about -0.01 per unit of risk. If you would invest  24.00  in Ethena on August 30, 2024 and sell it today you would earn a total of  47.00  from holding Ethena or generate 195.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Ethena  vs.  ATP

Ethena

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ethena are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ethena exhibited solid returns over the last few months and may actually be approaching a breakup point.

ATP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ATP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for ATP shareholders.

Pair Trading with Ethena and ATP

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

The idea behind Ethena and ATP 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.