Correlation Between Ethereum Classic and Bitcoin

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

Diversification Opportunities for Ethereum Classic and Bitcoin

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ethereum and Bitcoin is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum Classic and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin and Ethereum Classic 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 Ethereum Classic are associated (or correlated) with Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of Ethereum Classic i.e., Ethereum Classic and Bitcoin go up and down completely randomly.

Pair Corralation between Ethereum Classic and Bitcoin

Assuming the 90 days trading horizon Ethereum Classic is expected to under-perform the Bitcoin. In addition to that, Ethereum Classic is 1.71 times more volatile than Bitcoin. It trades about -0.09 of its total potential returns per unit of risk. Bitcoin is currently generating about 0.01 per unit of volatility. If you would invest  6,400,442  in Bitcoin on January 22, 2024 and sell it today you would lose (6,043) from holding Bitcoin or give up 0.09% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ethereum Classic  vs.  Bitcoin

 Performance 
       Timeline  
Ethereum Classic 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum Classic are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ethereum Classic exhibited solid returns over the last few months and may actually be approaching a breakup point.
Bitcoin 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ethereum Classic and Bitcoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ethereum Classic and Bitcoin

The main advantage of trading using opposite Ethereum Classic and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum Classic position performs unexpectedly, Bitcoin 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 Bitcoin will offset losses from the drop in Bitcoin's long position.
The idea behind Ethereum Classic and Bitcoin 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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