Correlation Between Ethereum and OAX

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

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

Diversification Opportunities for Ethereum and OAX

0.74

Correlation Coefficient

Ethereum  OAX

Poor diversification

The 3 months correlation between Ethereum and OAX is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and OAX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OAX and 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 Ethereum are associated (or correlated) with OAX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OAX has no effect on the direction of Ethereum i.e., Ethereum and OAX go up and down completely randomly.

Pair Corralation between Ethereum and OAX

Assuming the 90 days trading horizon Ethereum is expected to under-perform the OAX. But the crypto coin apears to be less risky and, when comparing its historical volatility, Ethereum is 5.18 times less risky than OAX. The crypto coin trades about -0.22 of its potential returns per unit of risk. The OAX is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  4.27  in OAX on January 4, 2025 and sell it today you would lose (2.37) from holding OAX or give up 55.5% of portfolio value over 90 days.

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

Ethereum  vs.  OAX

Ethereum

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ethereum 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 technical indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for Ethereum shareholders.

OAX

Risk-Adjusted Performance

Very Weak

Over the last 90 days OAX has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unsteady basic indicators, OAX may actually be approaching a critical reversion point that can send shares even higher in May 2025.

Pair Trading with Ethereum and OAX

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

The idea behind Ethereum and OAX 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.