Correlation Between Numeraire and Etherfi

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

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

Diversification Opportunities for Numeraire and Etherfi

0.93

Correlation Coefficient

Numeraire  Etherfi

Almost no diversification

The 3 months correlation between Numeraire and Etherfi is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Numeraire and Etherfi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Etherfi and Numeraire 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 Numeraire are associated (or correlated) with Etherfi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Etherfi has no effect on the direction of Numeraire i.e., Numeraire and Etherfi go up and down completely randomly.

Pair Corralation between Numeraire and Etherfi

Assuming the 90 days trading horizon Numeraire is expected to generate 1.53 times less return on investment than Etherfi. But when comparing it to its historical volatility, Numeraire is 1.47 times less risky than Etherfi. It trades about 0.17 of its potential returns per unit of risk. Etherfi is currently generating about 0.18 of returns per unit of risk over similar time horizon. 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

Numeraire  vs.  Etherfi

Numeraire

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Numeraire are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Numeraire exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Numeraire and Etherfi

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

The idea behind Numeraire and Etherfi 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.