Correlation Between Ethereum and Lara Exploration

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

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

Diversification Opportunities for Ethereum and Lara Exploration

0.22

Correlation Coefficient

Ethereum  Lara Exploration

Modest diversification

The 3 months correlation between Ethereum and Lara is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Lara Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lara Exploration 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 Lara Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lara Exploration has no effect on the direction of Ethereum i.e., Ethereum and Lara Exploration go up and down completely randomly.

Pair Corralation between Ethereum and Lara Exploration

Assuming the 90 days trading horizon Ethereum is expected to generate 0.53 times more return on investment than Lara Exploration. However, Ethereum is 1.88 times less risky than Lara Exploration. It trades about 0.15 of its potential returns per unit of risk. Lara Exploration is currently generating about 0.07 per unit of risk. If you would invest  243,903  in Ethereum on October 10, 2024 and sell it today you would earn a total of  97,337  from holding Ethereum or generate 39.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Ethereum  vs.  Lara Exploration

Ethereum

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 11 (%) 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.

Lara Exploration

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lara Exploration are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Lara Exploration reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum and Lara Exploration

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

The idea behind Ethereum and Lara Exploration 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.