Correlation Between Ethena and SNET

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

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

Diversification Opportunities for Ethena and SNET

-0.59

Correlation Coefficient

Ethena  SNET

Excellent diversification

The 3 months correlation between Ethena and SNET is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and SNET in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNET 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 SNET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNET has no effect on the direction of Ethena i.e., Ethena and SNET go up and down completely randomly.

Pair Corralation between Ethena and SNET

Assuming the 90 days trading horizon Ethena is expected to generate 1.18 times less return on investment than SNET. But when comparing it to its historical volatility, Ethena is 2.62 times less risky than SNET. It trades about 0.34 of its potential returns per unit of risk. SNET is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.13  in SNET on August 30, 2024 and sell it today you would earn a total of  0.06  from holding SNET or generate 46.14% return on investment over 90 days.

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

Ethena  vs.  SNET

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.

SNET

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SNET are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SNET exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethena and SNET

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

The idea behind Ethena and SNET 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.