Correlation Between Ethena and SOLVE

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

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

Diversification Opportunities for Ethena and SOLVE

0.62

Correlation Coefficient

Ethena  SOLVE

Poor diversification

The 3 months correlation between Ethena and SOLVE is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and SOLVE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLVE 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 SOLVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLVE has no effect on the direction of Ethena i.e., Ethena and SOLVE go up and down completely randomly.

Pair Corralation between Ethena and SOLVE

Assuming the 90 days trading horizon Ethena is expected to generate 1.01 times more return on investment than SOLVE. However, Ethena is 1.01 times more volatile than SOLVE. It trades about 0.02 of its potential returns per unit of risk. SOLVE is currently generating about -0.23 per unit of risk. If you would invest  40.00  in Ethena on February 18, 2025 and sell it today you would lose (5.00) from holding Ethena or give up 12.5% of portfolio value over 90 days.

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

Ethena  vs.  SOLVE

Ethena

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ethena are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Ethena may actually be approaching a critical reversion point that can send shares even higher in June 2025.

SOLVE

Risk-Adjusted Performance

Very Weak

Over the last 90 days SOLVE 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 June 2025. The latest tumult may also be a sign of longer-term up-swing for SOLVE shareholders.

Pair Trading with Ethena and SOLVE

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

The idea behind Ethena and SOLVE 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.