Correlation Between Ethereum and Western Asset

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

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

Diversification Opportunities for Ethereum and Western Asset

-0.63

Correlation Coefficient

Ethereum  Western Asset

Excellent diversification

The 3 months correlation between Ethereum and Western is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Western Asset Mortgage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Asset Mortgage 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 Western Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Asset Mortgage has no effect on the direction of Ethereum i.e., Ethereum and Western Asset go up and down completely randomly.

Pair Corralation between Ethereum and Western Asset

Assuming the 90 days trading horizon Ethereum is expected to under-perform the Western Asset. In addition to that, Ethereum is 19.6 times more volatile than Western Asset Mortgage. It trades about -0.2 of its total potential returns per unit of risk. Western Asset Mortgage is currently generating about 0.13 per unit of volatility. If you would invest  1,203  in Western Asset Mortgage on December 22, 2024 and sell it today you would earn a total of  19.00  from holding Western Asset Mortgage or generate 1.58% return on investment over 90 days.

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

Ethereum  vs.  Western Asset Mortgage

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.

Western Asset Mortgage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western Asset Mortgage are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Western Asset 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 Western Asset

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

The idea behind Ethereum and Western Asset Mortgage 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.