Correlation Between True USD and Ethereum

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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

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between True and Ethereum is 0.29. 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 385.5 times less return on investment than Ethereum. But when comparing it to its historical volatility, True USD is 8.56 times less risky than Ethereum. It trades about 0.0 of its potential returns per unit of risk. Ethereum is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  135,240  in Ethereum on December 29, 2023 and sell it today you would earn a total of  215,885  from holding Ethereum or generate 159.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

True USD  vs.  Ethereum

 Performance 
       Timeline  
True USD 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

14 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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