Correlation Between Ethena and YAM

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

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

Diversification Opportunities for Ethena and YAM

0.5

Correlation Coefficient

Ethena  YAM

Very weak diversification

The 3 months correlation between Ethena and YAM is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and YAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on YAM 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 YAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of YAM has no effect on the direction of Ethena i.e., Ethena and YAM go up and down completely randomly.

Pair Corralation between Ethena and YAM

Assuming the 90 days trading horizon Ethena is expected to under-perform the YAM. But the crypto coin apears to be less risky and, when comparing its historical volatility, Ethena is 2.41 times less risky than YAM. The crypto coin trades about -0.11 of its potential returns per unit of risk. The YAM is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3.50  in YAM on December 29, 2024 and sell it today you would lose (1.51) from holding YAM or give up 43.14% of portfolio value over 90 days.

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

Ethena  vs.  YAM

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.

YAM

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in YAM are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, YAM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethena and YAM

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

The idea behind Ethena and YAM 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.