Correlation Between Ethereum Classic and EMC2
Can any of the company-specific risk be diversified away by investing in both Ethereum Classic and EMC2 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 EMC2 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethereum Classic and EMC2, you can compare the effects of market volatilities on Ethereum Classic and EMC2 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 EMC2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethereum Classic and EMC2.
Diversification Opportunities for Ethereum Classic and EMC2
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ethereum and EMC2 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum Classic and EMC2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EMC2 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 EMC2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EMC2 has no effect on the direction of Ethereum Classic i.e., Ethereum Classic and EMC2 go up and down completely randomly.
Pair Corralation between Ethereum Classic and EMC2
Assuming the 90 days trading horizon Ethereum Classic is expected to generate 4.62 times less return on investment than EMC2. In addition to that, Ethereum Classic is 1.62 times more volatile than EMC2. It trades about 0.04 of its total potential returns per unit of risk. EMC2 is currently generating about 0.32 per unit of volatility. If you would invest 0.05 in EMC2 on November 1, 2024 and sell it today you would earn a total of 0.01 from holding EMC2 or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ethereum Classic vs. EMC2
Performance |
| Timeline |
| Ethereum Classic |
| EMC2 |
Ethereum Classic and EMC2 Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ethereum Classic and EMC2
The main advantage of trading using opposite Ethereum Classic and EMC2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum Classic position performs unexpectedly, EMC2 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 EMC2 will offset losses from the drop in EMC2's long position.| Ethereum Classic vs. Ethereum PoW | Ethereum Classic vs. Staked Ether | Ethereum Classic vs. Phala Network | Ethereum Classic 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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