Correlation Between Bitcoin Cash and Algorand

Can any of the company-specific risk be diversified away by investing in both Bitcoin Cash and Algorand 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 Bitcoin Cash and Algorand into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bitcoin Cash and Algorand, you can compare the effects of market volatilities on Bitcoin Cash and Algorand 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 Bitcoin Cash with a short position of Algorand. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin Cash and Algorand.

Diversification Opportunities for Bitcoin Cash and Algorand

0.39

Correlation Coefficient

Bitcoin Cash  Algorand

Weak diversification

The 3 months correlation between Bitcoin and Algorand is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and Algorand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algorand and Bitcoin Cash 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 Bitcoin Cash are associated (or correlated) with Algorand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algorand has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and Algorand go up and down completely randomly.

Pair Corralation between Bitcoin Cash and Algorand

Assuming the 90 days trading horizon Bitcoin Cash is expected to under-perform the Algorand. But the crypto coin apears to be less risky and, when comparing its historical volatility, Bitcoin Cash is 1.19 times less risky than Algorand. The crypto coin trades about -0.3 of its potential returns per unit of risk. The Algorand is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Algorand on February 7, 2024 and sell it today you would lose (4.00) from holding Algorand or give up 17.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Bitcoin Cash  vs.  Algorand

Bitcoin Cash

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Cash are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Bitcoin Cash exhibited solid returns over the last few months and may actually be approaching a breakup point.

Algorand

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algorand are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Algorand exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin Cash and Algorand

The main advantage of trading using opposite Bitcoin Cash and Algorand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin Cash position performs unexpectedly, Algorand 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 Algorand will offset losses from the drop in Algorand's long position.

The idea behind Bitcoin Cash and Algorand 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 Transaction History module to view history of all your transactions and understand their impact on performance.