Correlation Between Grayscale Ethereum and Wisdom Tree

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

By analyzing existing cross correlation between Grayscale Ethereum Trust and Wisdom Tree Bitcoin, you can compare the effects of market volatilities on Grayscale Ethereum and Wisdom Tree 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 Grayscale Ethereum with a short position of Wisdom Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Ethereum and Wisdom Tree.

Diversification Opportunities for Grayscale Ethereum and Wisdom Tree

0.82

Correlation Coefficient

Grayscale Ethereum  Wisdom Tree

Very poor diversification

The 3 months correlation between Grayscale and Wisdom is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Ethereum Trust and Wisdom Tree Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdom Tree Bitcoin and Grayscale 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 Grayscale Ethereum Trust are associated (or correlated) with Wisdom Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdom Tree Bitcoin has no effect on the direction of Grayscale Ethereum i.e., Grayscale Ethereum and Wisdom Tree go up and down completely randomly.

Pair Corralation between Grayscale Ethereum and Wisdom Tree

Given the investment horizon of 90 days Grayscale Ethereum Trust is expected to under-perform the Wisdom Tree. In addition to that, Grayscale Ethereum is 1.52 times more volatile than Wisdom Tree Bitcoin. It trades about -0.17 of its total potential returns per unit of risk. Wisdom Tree Bitcoin is currently generating about -0.05 per unit of volatility. If you would invest  9,954  in Wisdom Tree Bitcoin on December 29, 2024 and sell it today you would lose (1,092) from holding Wisdom Tree Bitcoin or give up 10.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Grayscale Ethereum Trust  vs.  Wisdom Tree Bitcoin

Grayscale Ethereum Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Ethereum Trust 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 Etf'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 the fund shareholders.

Wisdom Tree Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wisdom Tree Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Grayscale Ethereum and Wisdom Tree

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

The idea behind Grayscale Ethereum Trust and Wisdom Tree Bitcoin 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.