Correlation Between Ethereum PoW and Dogecoin

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

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

Diversification Opportunities for Ethereum PoW and Dogecoin

0.65

Correlation Coefficient

Ethereum PoW  Dogecoin

Poor diversification

The 3 months correlation between Ethereum and Dogecoin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum PoW and Dogecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dogecoin and Ethereum PoW 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 PoW are associated (or correlated) with Dogecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dogecoin has no effect on the direction of Ethereum PoW i.e., Ethereum PoW and Dogecoin go up and down completely randomly.

Pair Corralation between Ethereum PoW and Dogecoin

Assuming the 90 days trading horizon Ethereum PoW is expected to generate 1.26 times less return on investment than Dogecoin. In addition to that, Ethereum PoW is 1.01 times more volatile than Dogecoin. It trades about 0.12 of its total potential returns per unit of risk. Dogecoin is currently generating about 0.15 per unit of volatility. If you would invest  9.56  in Dogecoin on August 6, 2024 and sell it today you would earn a total of  6.44  from holding Dogecoin or generate 67.36% return on investment over 90 days.

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

Ethereum PoW  vs.  Dogecoin

Ethereum PoW

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum PoW are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Ethereum PoW exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dogecoin

Risk-Adjusted Performance

11 of 100

Good

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

Pair Trading with Ethereum PoW and Dogecoin

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

The idea behind Ethereum PoW and Dogecoin 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.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.