Correlation Between Ethereum and Whitehaven Coal

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

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

Diversification Opportunities for Ethereum and Whitehaven Coal

-0.39

Correlation Coefficient

Ethereum  Whitehaven Coal

Very good diversification

The 3 months correlation between Ethereum and Whitehaven is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Whitehaven Coal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitehaven Coal 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 Whitehaven Coal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitehaven Coal has no effect on the direction of Ethereum i.e., Ethereum and Whitehaven Coal go up and down completely randomly.

Pair Corralation between Ethereum and Whitehaven Coal

Assuming the 90 days trading horizon Ethereum is expected to generate 2.2 times more return on investment than Whitehaven Coal. However, Ethereum is 2.2 times more volatile than Whitehaven Coal. It trades about 0.14 of its potential returns per unit of risk. Whitehaven Coal is currently generating about -0.01 per unit of risk. If you would invest  243,620  in Ethereum on October 24, 2024 and sell it today you would earn a total of  89,288  from holding Ethereum or generate 36.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.83%
Values	Daily Returns

Ethereum  vs.  Whitehaven Coal

Ethereum

Risk-Adjusted Performance

10 of 100

OK

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.

Whitehaven Coal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whitehaven Coal has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Whitehaven Coal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ethereum and Whitehaven Coal

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

The idea behind Ethereum and Whitehaven Coal 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.