Correlation Between NEM and Staked Ether

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

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

Diversification Opportunities for NEM and Staked Ether

0.53

Correlation Coefficient

NEM  Staked Ether

Very weak diversification

The 3 months correlation between NEM and Staked is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NEM and Staked Ether in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Staked Ether and NEM 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 NEM are associated (or correlated) with Staked Ether. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Staked Ether has no effect on the direction of NEM i.e., NEM and Staked Ether go up and down completely randomly.

Pair Corralation between NEM and Staked Ether

Assuming the 90 days trading horizon NEM is expected to generate 9.12 times more return on investment than Staked Ether. However, NEM is 9.12 times more volatile than Staked Ether. It trades about 0.13 of its potential returns per unit of risk. Staked Ether is currently generating about -0.36 per unit of risk. If you would invest  2.31  in NEM on December 2, 2024 and sell it today you would lose (0.33) from holding NEM or give up 14.29% of portfolio value over 90 days.

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

NEM  vs.  Staked Ether

NEM

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, NEM exhibited solid returns over the last few months and may actually be approaching a breakup point.

Staked Ether

Risk-Adjusted Performance

Very Weak

Over the last 90 days Staked Ether 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 Staked Ether shareholders.

Pair Trading with NEM and Staked Ether

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

The idea behind NEM and Staked Ether 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.