Correlation Between Ethena and SKALE Network

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

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

Diversification Opportunities for Ethena and SKALE Network

0.86

Correlation Coefficient

Ethena  SKALE Network

Very poor diversification

The 3 months correlation between Ethena and SKALE is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and SKALE Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SKALE Network 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 SKALE Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SKALE Network has no effect on the direction of Ethena i.e., Ethena and SKALE Network go up and down completely randomly.

Pair Corralation between Ethena and SKALE Network

Assuming the 90 days trading horizon Ethena is expected to generate 1.06 times less return on investment than SKALE Network. In addition to that, Ethena is 1.55 times more volatile than SKALE Network. It trades about 0.37 of its total potential returns per unit of risk. SKALE Network is currently generating about 0.6 per unit of volatility. If you would invest  3.42  in SKALE Network on September 1, 2024 and sell it today you would earn a total of  4.60  from holding SKALE Network or generate 134.5% return on investment over 90 days.

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

Ethena  vs.  SKALE Network

Ethena

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ethena are ranked lower than 20 (%) 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.

SKALE Network

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SKALE Network are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, SKALE Network exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethena and SKALE Network

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

The idea behind Ethena and SKALE Network 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.