Correlation Between Grayscale Ethereum and Volatility Shares

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

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

Diversification Opportunities for Grayscale Ethereum and Volatility Shares

1.0

Correlation Coefficient

Grayscale Ethereum  Volatility Shares

No risk reduction

The 3 months correlation between Grayscale and Volatility is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Ethereum Trust and Volatility Shares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volatility Shares Trust and Grayscale Ethereum 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 Grayscale Ethereum Trust are associated (or correlated) with Volatility Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volatility Shares Trust has no effect on the direction of Grayscale Ethereum i.e., Grayscale Ethereum and Volatility Shares go up and down completely randomly.

Pair Corralation between Grayscale Ethereum and Volatility Shares

Given the investment horizon of 90 days Grayscale Ethereum Trust is expected to generate 0.56 times more return on investment than Volatility Shares. However, Grayscale Ethereum Trust is 1.78 times less risky than Volatility Shares. It trades about 0.07 of its potential returns per unit of risk. Volatility Shares Trust is currently generating about 0.02 per unit of risk. If you would invest  1,813  in Grayscale Ethereum Trust on September 13, 2024 and sell it today you would earn a total of  1,411  from holding Grayscale Ethereum Trust or generate 77.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	53.63%
Values	Daily Returns

Grayscale Ethereum Trust  vs.  Volatility Shares Trust

Grayscale Ethereum Trust

Risk-Adjusted Performance

14 of 100

Good

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

Volatility Shares Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volatility Shares Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical indicators, Volatility Shares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grayscale Ethereum and Volatility Shares

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

The idea behind Grayscale Ethereum Trust and Volatility Shares Trust 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.