Correlation Between Cosmos and Ethereum
Can any of the company-specific risk be diversified away by investing in both Cosmos and Ethereum 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 Cosmos and Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cosmos and Ethereum, you can compare the effects of market volatilities on Cosmos and Ethereum 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 Cosmos with a short position of Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Ethereum.
Diversification Opportunities for Cosmos and Ethereum
Almost no diversification
The 3 months correlation between Cosmos and Ethereum is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Cosmos 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 Cosmos are associated (or correlated) with Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum has no effect on the direction of Cosmos i.e., Cosmos and Ethereum go up and down completely randomly.
Pair Corralation between Cosmos and Ethereum
Assuming the 90 days trading horizon Cosmos is expected to under-perform the Ethereum. In addition to that, Cosmos is 1.6 times more volatile than Ethereum. It trades about -0.02 of its total potential returns per unit of risk. Ethereum is currently generating about -0.03 per unit of volatility. If you would invest 311,210 in Ethereum on November 18, 2024 and sell it today you would lose (41,854) from holding Ethereum or give up 13.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cosmos vs. Ethereum
Performance |
| Timeline |
| Cosmos |
| Ethereum |
Cosmos and Ethereum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cosmos and Ethereum
The main advantage of trading using opposite Cosmos and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, Ethereum 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 Ethereum will offset losses from the drop in Ethereum's long position.The idea behind Cosmos and Ethereum 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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