Correlation Between Ethereum and Paramount Resources

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

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

Diversification Opportunities for Ethereum and Paramount Resources

0.66

Correlation Coefficient

Ethereum  Paramount Resources

Poor diversification

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

Pair Corralation between Ethereum and Paramount Resources

Assuming the 90 days trading horizon Ethereum is expected to under-perform the Paramount Resources. But the crypto coin apears to be less risky and, when comparing its historical volatility, Ethereum is 1.48 times less risky than Paramount Resources. The crypto coin trades about -0.2 of its potential returns per unit of risk. The Paramount Resources is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  2,139  in Paramount Resources on December 23, 2024 and sell it today you would lose (918.00) from holding Paramount Resources or give up 42.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.85%
Values	Daily Returns

Ethereum  vs.  Paramount Resources

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.

Paramount Resources

Risk-Adjusted Performance

Very Weak

Over the last 90 days Paramount Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Ethereum and Paramount Resources

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

The idea behind Ethereum and Paramount Resources 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.