Correlation Between Etherfi and Near

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

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

Diversification Opportunities for Etherfi and Near

0.9

Correlation Coefficient

Etherfi  Near

Almost no diversification

The 3 months correlation between Etherfi and Near is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Etherfi and Near in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Near and Etherfi 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 Etherfi are associated (or correlated) with Near. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Near has no effect on the direction of Etherfi i.e., Etherfi and Near go up and down completely randomly.

Pair Corralation between Etherfi and Near

Assuming the 90 days trading horizon Etherfi is expected to generate 1.44 times more return on investment than Near. However, Etherfi is 1.44 times more volatile than Near. It trades about 0.18 of its potential returns per unit of risk. Near is currently generating about 0.21 per unit of risk. If you would invest  125.00  in Etherfi on September 2, 2024 and sell it today you would earn a total of  131.00  from holding Etherfi or generate 104.8% return on investment over 90 days.

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

Etherfi  vs.  Near

Etherfi

Risk-Adjusted Performance

14 of 100

Good

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

Near

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Near are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Near exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Etherfi and Near

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

The idea behind Etherfi and Near 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.