Correlation Between REN and Etherfi

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

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

Diversification Opportunities for REN and Etherfi

0.95

Correlation Coefficient

REN  Etherfi

Almost no diversification

The 3 months correlation between REN and Etherfi is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding REN and Etherfi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etherfi and REN 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 REN are associated (or correlated) with Etherfi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etherfi has no effect on the direction of REN i.e., REN and Etherfi go up and down completely randomly.

Pair Corralation between REN and Etherfi

Assuming the 90 days trading horizon REN is expected to generate 1.43 times more return on investment than Etherfi. However, REN is 1.43 times more volatile than Etherfi. It trades about -0.16 of its potential returns per unit of risk. Etherfi is currently generating about -0.3 per unit of risk. If you would invest  3.11  in REN on December 30, 2024 and sell it today you would lose (2.13) from holding REN or give up 68.49% of portfolio value over 90 days.

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

REN  vs.  Etherfi

REN

Risk-Adjusted Performance

Very Weak

Over the last 90 days REN 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 basic 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 REN shareholders.

Etherfi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Etherfi 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 fundamental 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 Etherfi shareholders.

Pair Trading with REN and Etherfi

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

The idea behind REN and Etherfi 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.