Correlation Between Ethereum and Alligator Energy

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

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

Diversification Opportunities for Ethereum and Alligator Energy

-0.72

Correlation Coefficient

Ethereum  Alligator Energy

Pay attention - limited upside

The 3 months correlation between Ethereum and Alligator is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Alligator Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alligator Energy and Ethereum 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 Ethereum are associated (or correlated) with Alligator Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alligator Energy has no effect on the direction of Ethereum i.e., Ethereum and Alligator Energy go up and down completely randomly.

Pair Corralation between Ethereum and Alligator Energy

Assuming the 90 days trading horizon Ethereum is expected to generate 2.7 times less return on investment than Alligator Energy. But when comparing it to its historical volatility, Ethereum is 2.3 times less risky than Alligator Energy. It trades about 0.06 of its potential returns per unit of risk. Alligator Energy Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.20  in Alligator Energy Limited on October 11, 2024 and sell it today you would lose (0.84) from holding Alligator Energy Limited or give up 26.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	59.76%
Values	Daily Returns

Ethereum  vs.  Alligator Energy Limited

Ethereum

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Alligator Energy

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alligator Energy Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alligator Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum and Alligator Energy

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

The idea behind Ethereum and Alligator Energy Limited 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.