Correlation Between Ethereum and Spruce Biosciences

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

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

Diversification Opportunities for Ethereum and Spruce Biosciences

0.5

Correlation Coefficient

Ethereum  Spruce Biosciences

Very weak diversification

The 3 months correlation between Ethereum and Spruce is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Spruce Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spruce Biosciences 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 Spruce Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spruce Biosciences has no effect on the direction of Ethereum i.e., Ethereum and Spruce Biosciences go up and down completely randomly.

Pair Corralation between Ethereum and Spruce Biosciences

Assuming the 90 days trading horizon Ethereum is expected to under-perform the Spruce Biosciences. In addition to that, Ethereum is 1.38 times more volatile than Spruce Biosciences. It trades about -0.2 of its total potential returns per unit of risk. Spruce Biosciences is currently generating about -0.05 per unit of volatility. If you would invest  38.00  in Spruce Biosciences on December 21, 2024 and sell it today you would lose (4.00) from holding Spruce Biosciences or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.75%
Values	Daily Returns

Ethereum  vs.  Spruce Biosciences

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.

Spruce Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spruce Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ethereum and Spruce Biosciences

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

The idea behind Ethereum and Spruce Biosciences 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.