Correlation Between Ethereum and SPDR Dow

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

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

Diversification Opportunities for Ethereum and SPDR Dow

-0.1

Correlation Coefficient

Ethereum  SPDR Dow

Good diversification

The 3 months correlation between Ethereum and SPDR is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and SPDR Dow Jones in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Dow Jones 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 SPDR Dow. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Dow Jones has no effect on the direction of Ethereum i.e., Ethereum and SPDR Dow go up and down completely randomly.

Pair Corralation between Ethereum and SPDR Dow

Assuming the 90 days trading horizon Ethereum is expected to under-perform the SPDR Dow. In addition to that, Ethereum is 5.31 times more volatile than SPDR Dow Jones. It trades about -0.2 of its total potential returns per unit of risk. SPDR Dow Jones is currently generating about 0.02 per unit of volatility. If you would invest  2,939  in SPDR Dow Jones on December 22, 2024 and sell it today you would earn a total of  15.00  from holding SPDR Dow Jones or generate 0.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

Ethereum  vs.  SPDR Dow Jones

Ethereum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ethereum 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 technical 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 Ethereum shareholders.

SPDR Dow Jones

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Dow Jones are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SPDR Dow is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Ethereum and SPDR Dow

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

The idea behind Ethereum and SPDR Dow Jones 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.