Correlation Between Bitcoin Cash and BTM
Can any of the company-specific risk be diversified away by investing in both Bitcoin Cash and BTM 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 Bitcoin Cash and BTM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin Cash and BTM, you can compare the effects of market volatilities on Bitcoin Cash and BTM 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 Bitcoin Cash with a short position of BTM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin Cash and BTM.
Diversification Opportunities for Bitcoin Cash and BTM
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Bitcoin and BTM is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and BTM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTM and Bitcoin Cash 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 Bitcoin Cash are associated (or correlated) with BTM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTM has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and BTM go up and down completely randomly.
Pair Corralation between Bitcoin Cash and BTM
Assuming the 90 days trading horizon Bitcoin Cash is expected to under-perform the BTM. In addition to that, Bitcoin Cash is 1.05 times more volatile than BTM. It trades about -0.34 of its total potential returns per unit of risk. BTM is currently generating about 0.01 per unit of volatility. If you would invest 1.12 in BTM on February 5, 2024 and sell it today you would lose (0.02) from holding BTM or give up 1.79% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bitcoin Cash vs. BTM
Performance |
| Timeline |
| Bitcoin Cash |
| BTM |
Bitcoin Cash and BTM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin Cash and BTM
The main advantage of trading using opposite Bitcoin Cash and BTM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin Cash position performs unexpectedly, BTM 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 BTM will offset losses from the drop in BTM's long position.| Bitcoin Cash vs. Bitcoin | Bitcoin Cash vs. Dogecoin | Bitcoin Cash vs. Litecoin | Bitcoin Cash vs. Ethereum Classic |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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