Correlation Between Bitcoin Gold and Cosmos

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

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

Diversification Opportunities for Bitcoin Gold and Cosmos

0.75

Correlation Coefficient

Bitcoin Gold  Cosmos

Poor diversification

The 3 months correlation between Bitcoin and Cosmos is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Gold and Cosmos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cosmos and Bitcoin Gold 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 Gold are associated (or correlated) with Cosmos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cosmos has no effect on the direction of Bitcoin Gold i.e., Bitcoin Gold and Cosmos go up and down completely randomly.

Pair Corralation between Bitcoin Gold and Cosmos

Assuming the 90 days trading horizon Bitcoin Gold is expected to generate 1.22 times more return on investment than Cosmos. However, Bitcoin Gold is 1.22 times more volatile than Cosmos. It trades about 0.15 of its potential returns per unit of risk. Cosmos is currently generating about -0.07 per unit of risk. If you would invest  2,394  in Bitcoin Gold on January 17, 2024 and sell it today you would earn a total of  945.00  from holding Bitcoin Gold or generate 39.47% return on investment over 90 days.

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

Bitcoin Gold  vs.  Cosmos

Bitcoin Gold

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Gold are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bitcoin Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cosmos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Cosmos shareholders.

Pair Trading with Bitcoin Gold and Cosmos

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

The idea behind Bitcoin Gold and Cosmos 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.