Correlation Between Ethereum and Direxion

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

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

Diversification Opportunities for Ethereum and Direxion

0.26

Correlation Coefficient

Ethereum  Direxion

Modest diversification

The 3 months correlation between Ethereum and Direxion is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Direxion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion 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 Direxion. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion has no effect on the direction of Ethereum i.e., Ethereum and Direxion go up and down completely randomly.

Pair Corralation between Ethereum and Direxion

If you would invest  312,799  in Ethereum on October 9, 2024 and sell it today you would earn a total of  55,026  from holding Ethereum or generate 17.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	2.44%
Values	Daily Returns

Ethereum  vs.  Direxion

Ethereum

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 15 (%) 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.

Direxion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Direxion is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ethereum and Direxion

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

The idea behind Ethereum and Direxion 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.