Correlation Between Bitcoin Cash and Lovesac

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

By analyzing existing cross correlation between Bitcoin Cash and The Lovesac, you can compare the effects of market volatilities on Bitcoin Cash and Lovesac 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 Lovesac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin Cash and Lovesac.

Diversification Opportunities for Bitcoin Cash and Lovesac

-0.4

Correlation Coefficient

Bitcoin Cash  Lovesac

Very good diversification

The 3 months correlation between Bitcoin and Lovesac is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and The Lovesac in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lovesac 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 Lovesac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lovesac has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and Lovesac go up and down completely randomly.

Pair Corralation between Bitcoin Cash and Lovesac

Assuming the 90 days trading horizon Bitcoin Cash is expected to under-perform the Lovesac. In addition to that, Bitcoin Cash is 1.7 times more volatile than The Lovesac. It trades about -0.01 of its total potential returns per unit of risk. The Lovesac is currently generating about 0.06 per unit of volatility. If you would invest  2,164  in The Lovesac on January 26, 2024 and sell it today you would earn a total of  79.00  from holding The Lovesac or generate 3.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Bitcoin Cash  vs.  The Lovesac

Bitcoin Cash

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Cash are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Bitcoin Cash exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lovesac

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Lovesac has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Lovesac is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bitcoin Cash and Lovesac

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

The idea behind Bitcoin Cash and The Lovesac 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..