Correlation Between SOLVE and Ethereum Classic

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

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

Diversification Opportunities for SOLVE and Ethereum Classic

0.74

Correlation Coefficient

SOLVE  Ethereum Classic

Poor diversification

The 3 months correlation between SOLVE and Ethereum is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding SOLVE and Ethereum Classic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum Classic and SOLVE 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 SOLVE are associated (or correlated) with Ethereum Classic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum Classic has no effect on the direction of SOLVE i.e., SOLVE and Ethereum Classic go up and down completely randomly.

Pair Corralation between SOLVE and Ethereum Classic

Assuming the 90 days trading horizon SOLVE is expected to under-perform the Ethereum Classic. But the crypto coin apears to be less risky and, when comparing its historical volatility, SOLVE is 1.21 times less risky than Ethereum Classic. The crypto coin trades about -0.33 of its potential returns per unit of risk. The Ethereum Classic is currently generating about -0.16 of returns per unit of risk over similar time horizon. If you would invest  3,346  in Ethereum Classic on February 5, 2024 and sell it today you would lose (647.00) from holding Ethereum Classic or give up 19.34% of portfolio value over 90 days.

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

SOLVE  vs.  Ethereum Classic

SOLVE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SOLVE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, SOLVE is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ethereum Classic

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with SOLVE and Ethereum Classic

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

The idea behind SOLVE and Ethereum Classic 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.