Correlation Between Ethena and NEBL

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

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

Diversification Opportunities for Ethena and NEBL

-0.03

Correlation Coefficient

Ethena  NEBL

Good diversification

The 3 months correlation between Ethena and NEBL is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and NEBL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEBL 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 NEBL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEBL has no effect on the direction of Ethena i.e., Ethena and NEBL go up and down completely randomly.

Pair Corralation between Ethena and NEBL

Assuming the 90 days trading horizon Ethena is expected to under-perform the NEBL. But the crypto coin apears to be less risky and, when comparing its historical volatility, Ethena is 14.15 times less risky than NEBL. The crypto coin trades about -0.11 of its potential returns per unit of risk. The NEBL is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  0.77  in NEBL on December 29, 2024 and sell it today you would earn a total of  8.56  from holding NEBL or generate 1107.77% return on investment over 90 days.

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

Ethena  vs.  NEBL

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.

NEBL

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NEBL are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, NEBL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethena and NEBL

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

The idea behind Ethena and NEBL 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.