Correlation Between Etherfi and CVC

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

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

Diversification Opportunities for Etherfi and CVC

0.63

Correlation Coefficient

Etherfi  CVC

Poor diversification

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

Pair Corralation between Etherfi and CVC

Assuming the 90 days trading horizon Etherfi is expected to generate 0.99 times more return on investment than CVC. However, Etherfi is 1.01 times less risky than CVC. It trades about 0.18 of its potential returns per unit of risk. CVC is currently generating about 0.17 per unit of risk. If you would invest  127.00  in Etherfi on September 3, 2024 and sell it today you would earn a total of  129.00  from holding Etherfi or generate 101.57% return on investment over 90 days.

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

Etherfi  vs.  CVC

Etherfi

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Etherfi are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Etherfi exhibited solid returns over the last few months and may actually be approaching a breakup point.

CVC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, CVC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etherfi and CVC

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

The idea behind Etherfi and CVC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.