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Pair CorrelationComparison
Can any of the company-specific risk be diversified away by investing in both Bitcoin and Bitcoin Cash 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 and Bitcoin Cash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and Bitcoin Cash, you can compare the effects of market volatilities on Bitcoin and Bitcoin Cash 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 with a short position of Bitcoin Cash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and Bitcoin Cash.
Diversification Opportunities for Bitcoin and Bitcoin Cash
0.82 | Correlation Coefficient | Bitcoin Bitcoin Cash |
Very poor diversification
The 3 months correlation between Bitcoin and Bitcoin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Bitcoin Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Cash and Bitcoin 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 are associated (or correlated) with Bitcoin Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Cash has no effect on the direction of Bitcoin i.e., Bitcoin and Bitcoin Cash go up and down completely randomly.
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Pair Corralation between Bitcoin and Bitcoin Cash
Assuming the 90 days trading horizon Bitcoin is expected to generate 0.76 times more return on investment than Bitcoin Cash. However, Bitcoin is 1.31 times less risky than Bitcoin Cash. It trades about 0.04 of its potential returns per unit of risk. Bitcoin Cash is currently generating about -0.06 per unit of risk. If you would invest 5,902,755 in Bitcoin on June 20, 2024 and sell it today you would earn a total of 107,615 from holding Bitcoin or generate 1.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bitcoinvs.Bitcoin Cash
Performance
| Timeline |
| Bitcoin | Correlation | Profile |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Bitcoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
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Performance | Backtest |
| Bitcoin Cash | Correlation | Profile |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Over the last 90 days Bitcoin Cash has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's technical indicators remain rather sound which may send shares a bit higher in October 2024. The latest tumult may also be a sign of longer-term up-swing for Bitcoin Cash shareholders.
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Performance | Backtest |
Bitcoin and Bitcoin Cash Volatility Contrast
Predicted Return Density
| Returns |
Pair Trading with Bitcoin and Bitcoin Cash
The main advantage of trading using opposite Bitcoin and Bitcoin Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, Bitcoin Cash 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 Cash will offset losses from the drop in Bitcoin Cash's long position.
| Bitcoin vs. Staked Ether | Bitcoin vs. Cronos | Bitcoin vs. Wrapped Bitcoin | Bitcoin vs. XMR |
The idea behind Bitcoin and Bitcoin Cash 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.
| Bitcoin Cash vs. Bitcoin Gold | Bitcoin Cash vs. Bitcoin SV | Bitcoin Cash vs. Staked Ether | Bitcoin Cash vs. Phala Network |
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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