Correlation Between True USD and Ethereum
Can any of the company-specific risk be diversified away by investing in both True USD and Ethereum 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 True USD and Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between True USD and Ethereum, you can compare the effects of market volatilities on True USD and Ethereum 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 True USD with a short position of Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of True USD and Ethereum.
Diversification Opportunities for True USD and Ethereum
Very weak diversification
The 3 months correlation between True and Ethereum is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding True USD and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and True USD 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 True USD are associated (or correlated) with Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum has no effect on the direction of True USD i.e., True USD and Ethereum go up and down completely randomly.
Pair Corralation between True USD and Ethereum
Assuming the 90 days trading horizon True USD is expected to generate 0.16 times more return on investment than Ethereum. However, True USD is 6.36 times less risky than Ethereum. It trades about -0.08 of its potential returns per unit of risk. Ethereum is currently generating about -0.17 per unit of risk. If you would invest 101.00 in True USD on January 19, 2024 and sell it today you would lose (1.00) from holding True USD or give up 0.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
True USD vs. Ethereum
Performance |
| Timeline |
| True USD |
| Ethereum |
True USD and Ethereum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with True USD and Ethereum
The main advantage of trading using opposite True USD and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if True USD position performs unexpectedly, Ethereum 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 Ethereum will offset losses from the drop in Ethereum's long position.The idea behind True USD and Ethereum 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |