Correlation Between Avalanche and Ethereum

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Can any of the company-specific risk be diversified away by investing in both Avalanche 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 Avalanche and Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Avalanche and Ethereum, you can compare the effects of market volatilities on Avalanche 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 Avalanche with a short position of Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avalanche and Ethereum.

Diversification Opportunities for Avalanche and Ethereum

0.93
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Avalanche and Ethereum is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Avalanche 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 Avalanche 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 Avalanche i.e., Avalanche and Ethereum go up and down completely randomly.

Pair Corralation between Avalanche and Ethereum

Assuming the 90 days trading horizon Avalanche is expected to generate 1.47 times more return on investment than Ethereum. However, Avalanche is 1.47 times more volatile than Ethereum. It trades about 0.03 of its potential returns per unit of risk. Ethereum is currently generating about 0.03 per unit of risk. If you would invest  3,614  in Avalanche on November 5, 2022 and sell it today you would lose (1,485)  from holding Avalanche or give up 41.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Avalanche  vs.  Ethereum

 Performance (%) 
       Timeline  
Avalanche 
Avalanche Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avalanche sustained solid returns over the last few months and may actually be approaching a breakup point.

Avalanche Price Channel

Ethereum 
Ethereum Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ethereum sustained solid returns over the last few months and may actually be approaching a breakup point.

Ethereum Price Channel

Avalanche and Ethereum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Avalanche and Ethereum

The main advantage of trading using opposite Avalanche and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avalanche 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.
Avalanche vs. Ethereum
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The idea behind Avalanche 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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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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

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