Correlation Between Ethena and Avalanche
Can any of the company-specific risk be diversified away by investing in both Ethena and Avalanche 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 Ethena and Avalanche into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethena and Avalanche, you can compare the effects of market volatilities on Ethena and Avalanche 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 Ethena with a short position of Avalanche. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethena and Avalanche.
Diversification Opportunities for Ethena and Avalanche
Very poor diversification
The 3 months correlation between Ethena and Avalanche is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ethena and Avalanche in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalanche and Ethena 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 Ethena are associated (or correlated) with Avalanche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalanche has no effect on the direction of Ethena i.e., Ethena and Avalanche go up and down completely randomly.
Pair Corralation between Ethena and Avalanche
Assuming the 90 days trading horizon Ethena is expected to generate 1.96 times more return on investment than Avalanche. However, Ethena is 1.96 times more volatile than Avalanche. It trades about 0.33 of its potential returns per unit of risk. Avalanche is currently generating about 0.23 per unit of risk. If you would invest 26.00 in Ethena on May 28, 2025 and sell it today you would earn a total of 48.00 from holding Ethena or generate 184.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ethena vs. Avalanche
Performance |
| Timeline |
| Ethena |
| Avalanche |
Ethena and Avalanche Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethena and Avalanche
The main advantage of trading using opposite Ethena and Avalanche positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethena position performs unexpectedly, Avalanche 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 Avalanche will offset losses from the drop in Avalanche's long position.The idea behind Ethena and Avalanche 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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