Correlation Between Theta Fuel and Ethereum

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

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

Diversification Opportunities for Theta Fuel and Ethereum

0.85

Correlation Coefficient

Theta Fuel  Ethereum

Very poor diversification

The 3 months correlation between Theta and Ethereum is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Theta Fuel and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Theta Fuel 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 Theta Fuel are associated (or correlated) with Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum has no effect on the direction of Theta Fuel i.e., Theta Fuel and Ethereum go up and down completely randomly.

Pair Corralation between Theta Fuel and Ethereum

Assuming the 90 days trading horizon Theta Fuel is expected to generate 2.57 times more return on investment than Ethereum. However, Theta Fuel is 2.57 times more volatile than Ethereum. It trades about 0.15 of its potential returns per unit of risk. Ethereum is currently generating about -0.14 per unit of risk. If you would invest  8.96  in Theta Fuel on January 24, 2024 and sell it today you would earn a total of  2.04  from holding Theta Fuel or generate 22.77% return on investment over 90 days.

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

Theta Fuel  vs.  Ethereum

Theta Fuel

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Theta Fuel are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady essential indicators, Theta Fuel exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ethereum

Risk-Adjusted Performance

13 of 100

Good

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

Pair Trading with Theta Fuel and Ethereum

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

The idea behind Theta Fuel and Ethereum 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 Anywhere module to track or share privately all of your investments from the convenience of any device.