Correlation Between Ethena and FARM

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

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

Diversification Opportunities for Ethena and FARM

0.78

Correlation Coefficient

Ethena  FARM

Poor diversification

The 3 months correlation between Ethena and FARM is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and FARM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARM and Ethena 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 Ethena are associated (or correlated) with FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARM has no effect on the direction of Ethena i.e., Ethena and FARM go up and down completely randomly.

Pair Corralation between Ethena and FARM

Assuming the 90 days trading horizon Ethena is expected to generate 2.42 times more return on investment than FARM. However, Ethena is 2.42 times more volatile than FARM. It trades about 0.07 of its potential returns per unit of risk. FARM is currently generating about 0.0 per unit of risk. If you would invest  36.00  in Ethena on April 23, 2025 and sell it today you would earn a total of  7.00  from holding Ethena or generate 19.44% return on investment over 90 days.

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

Ethena  vs.  FARM

Ethena

Risk-Adjusted Performance

Modest

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

FARM

Risk-Adjusted Performance

Very Weak

Over the last 90 days FARM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, FARM is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ethena and FARM

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

The idea behind Ethena and FARM 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.