Correlation Between Cardano and Dogecoin
Can any of the company-specific risk be diversified away by investing in both Cardano and Dogecoin 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 Cardano and Dogecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cardano and Dogecoin, you can compare the effects of market volatilities on Cardano and Dogecoin 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 Cardano with a short position of Dogecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardano and Dogecoin.
Diversification Opportunities for Cardano and Dogecoin
Almost no diversification
The 3 months correlation between Cardano and Dogecoin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Dogecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dogecoin and Cardano 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 Cardano are associated (or correlated) with Dogecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dogecoin has no effect on the direction of Cardano i.e., Cardano and Dogecoin go up and down completely randomly.
Pair Corralation between Cardano and Dogecoin
Assuming the 90 days trading horizon Cardano is expected to generate 1.82 times less return on investment than Dogecoin. But when comparing it to its historical volatility, Cardano is 2.07 times less risky than Dogecoin. It trades about 0.15 of its potential returns per unit of risk. Dogecoin is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 6.49 in Dogecoin on August 28, 2024 and sell it today you would earn a total of 33.51 from holding Dogecoin or generate 516.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cardano vs. Dogecoin
Performance |
| Timeline |
| Cardano |
| Dogecoin |
Cardano and Dogecoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cardano and Dogecoin
The main advantage of trading using opposite Cardano and Dogecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardano position performs unexpectedly, Dogecoin 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 Dogecoin will offset losses from the drop in Dogecoin's long position.The idea behind Cardano and Dogecoin 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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