Correlation Between Wrapped EETH and Synthetix

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

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

Diversification Opportunities for Wrapped EETH and Synthetix

0.86

Correlation Coefficient

Wrapped EETH  Synthetix

Very poor diversification

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

Pair Corralation between Wrapped EETH and Synthetix

Assuming the 90 days trading horizon Wrapped EETH is expected to generate 1.55 times less return on investment than Synthetix. But when comparing it to its historical volatility, Wrapped eETH is 1.38 times less risky than Synthetix. It trades about 0.18 of its potential returns per unit of risk. Synthetix is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  134.00  in Synthetix on August 30, 2024 and sell it today you would earn a total of  107.00  from holding Synthetix or generate 79.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Wrapped eETH  vs.  Synthetix

Wrapped eETH

Risk-Adjusted Performance

14 of 100

Good

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

Synthetix

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Synthetix are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Synthetix exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wrapped EETH and Synthetix

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

The idea behind Wrapped eETH and Synthetix 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.