Correlation Between Staked Ether and REP

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

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

Diversification Opportunities for Staked Ether and REP

0.87

Correlation Coefficient

Staked Ether  REP

Very poor diversification

The 3 months correlation between Staked and REP is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Staked Ether and REP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REP and Staked Ether 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 Staked Ether are associated (or correlated) with REP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REP has no effect on the direction of Staked Ether i.e., Staked Ether and REP go up and down completely randomly.

Pair Corralation between Staked Ether and REP

Assuming the 90 days trading horizon Staked Ether is expected to generate 0.49 times more return on investment than REP. However, Staked Ether is 2.02 times less risky than REP. It trades about -0.08 of its potential returns per unit of risk. REP is currently generating about -0.18 per unit of risk. If you would invest  349,634  in Staked Ether on January 29, 2024 and sell it today you would lose (24,752) from holding Staked Ether or give up 7.08% of portfolio value over 90 days.

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

Staked Ether  vs.  REP

Staked Ether

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Staked Ether are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Staked Ether exhibited solid returns over the last few months and may actually be approaching a breakup point.

REP

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in REP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, REP exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Staked Ether and REP

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

The idea behind Staked Ether and REP 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.