Correlation Between Binance Coin and Decentraland
Can any of the company-specific risk be diversified away by investing in both Binance Coin and Decentraland 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 Binance Coin and Decentraland into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binance Coin and Decentraland, you can compare the effects of market volatilities on Binance Coin and Decentraland 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 Binance Coin with a short position of Decentraland. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binance Coin and Decentraland.
Diversification Opportunities for Binance Coin and Decentraland
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Binance and Decentraland is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and Decentraland in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decentraland and Binance Coin 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 Binance Coin are associated (or correlated) with Decentraland. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decentraland has no effect on the direction of Binance Coin i.e., Binance Coin and Decentraland go up and down completely randomly.
Pair Corralation between Binance Coin and Decentraland
Assuming the 90 days trading horizon Binance Coin is expected to generate 0.57 times more return on investment than Decentraland. However, Binance Coin is 1.76 times less risky than Decentraland. It trades about 0.07 of its potential returns per unit of risk. Decentraland is currently generating about -0.25 per unit of risk. If you would invest 58,029 in Binance Coin on January 25, 2024 and sell it today you would earn a total of 2,591 from holding Binance Coin or generate 4.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Binance Coin vs. Decentraland
Performance |
| Timeline |
| Binance Coin |
| Decentraland |
Binance Coin and Decentraland Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binance Coin and Decentraland
The main advantage of trading using opposite Binance Coin and Decentraland positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binance Coin position performs unexpectedly, Decentraland 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 Decentraland will offset losses from the drop in Decentraland's long position.| Binance Coin vs. Staked Ether | Binance Coin vs. Cronos | Binance Coin vs. Wrapped Bitcoin | Binance Coin vs. Monero |
| Decentraland vs. Solana | Decentraland vs. XRP | Decentraland vs. Staked Ether | Decentraland vs. The Open 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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