Correlation Between Ethereum and Active M

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

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

Diversification Opportunities for Ethereum and Active M

-0.66

Correlation Coefficient

Ethereum  Active M

Excellent diversification

The 3 months correlation between Ethereum and Active is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Active M Emerging in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Active M Emerging 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 Active M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Active M Emerging has no effect on the direction of Ethereum i.e., Ethereum and Active M go up and down completely randomly.

Pair Corralation between Ethereum and Active M

Assuming the 90 days trading horizon Ethereum is expected to generate 6.7 times more return on investment than Active M. However, Ethereum is 6.7 times more volatile than Active M Emerging. It trades about 0.03 of its potential returns per unit of risk. Active M Emerging is currently generating about -0.15 per unit of risk. If you would invest  324,718  in Ethereum on October 11, 2024 and sell it today you would earn a total of  8,333  from holding Ethereum or generate 2.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Ethereum  vs.  Active M Emerging

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.

Active M Emerging

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active M Emerging has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Active M is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ethereum and Active M

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

The idea behind Ethereum and Active M Emerging 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.