Correlation Between Decred and Bitcoin Cash
Can any of the company-specific risk be diversified away by investing in both Decred 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 Decred and Bitcoin Cash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Decred and Bitcoin Cash, you can compare the effects of market volatilities on Decred 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 Decred with a short position of Bitcoin Cash. Check out your portfolio center. Please also check ongoing floating volatility patterns of Decred and Bitcoin Cash.
Diversification Opportunities for Decred and Bitcoin Cash
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Decred and Bitcoin is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Decred and Bitcoin Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Cash and Decred 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 Decred 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 Decred i.e., Decred and Bitcoin Cash go up and down completely randomly.
Pair Corralation between Decred and Bitcoin Cash
Assuming the 90 days trading horizon Decred is expected to generate 2.19 times less return on investment than Bitcoin Cash. But when comparing it to its historical volatility, Decred is 1.29 times less risky than Bitcoin Cash. It trades about 0.2 of its potential returns per unit of risk. Bitcoin Cash is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 34,871 in Bitcoin Cash on August 25, 2024 and sell it today you would earn a total of 14,180 from holding Bitcoin Cash or generate 40.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Decred vs. Bitcoin Cash
Performance |
| Timeline |
| Decred |
| Bitcoin Cash |
Decred and Bitcoin Cash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Decred and Bitcoin Cash
The main advantage of trading using opposite Decred and Bitcoin Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Decred 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.The idea behind Decred 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. EigenLayer |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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