Correlation Between Bitcoin Cash and Bitcoin

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Can any of the company-specific risk be diversified away by investing in both Bitcoin Cash and Bitcoin 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 Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin Cash and Bitcoin, you can compare the effects of market volatilities on Bitcoin Cash and Bitcoin 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 Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin Cash and Bitcoin.

Diversification Opportunities for Bitcoin Cash and Bitcoin

0.77
  Correlation Coefficient

Poor diversification

The 3 months correlation between Bitcoin and Bitcoin is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin 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 Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and Bitcoin go up and down completely randomly.

Pair Corralation between Bitcoin Cash and Bitcoin

Assuming the 90 days trading horizon Bitcoin Cash is expected to generate 1.51 times more return on investment than Bitcoin. However, Bitcoin Cash is 1.51 times more volatile than Bitcoin. It trades about -0.06 of its potential returns per unit of risk. Bitcoin is currently generating about -0.11 per unit of risk. If you would invest  14,140  in Bitcoin Cash on July 6, 2022 and sell it today you would lose (2,424)  from holding Bitcoin Cash or give up 17.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Bitcoin Cash  vs.  Bitcoin

 Performance (%) 
       Timeline  
Bitcoin Cash 
Bitcoin Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Cash are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Bitcoin Cash sustained solid returns over the last few months and may actually be approaching a breakup point.

Bitcoin Price Channel

Bitcoin 
Bitcoin Performance
0 of 100
Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Bitcoin investors.

Bitcoin Price Channel

Bitcoin Cash and Bitcoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bitcoin Cash and Bitcoin

The main advantage of trading using opposite Bitcoin Cash and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin Cash position performs unexpectedly, Bitcoin 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 Bitcoin will offset losses from the drop in Bitcoin's long position.
Bitcoin Cash vs. Bitcoin
Bitcoin Cash vs. Dogecoin
Bitcoin Cash vs. Litecoin
Bitcoin Cash vs. Ethereum Classic
The idea behind Bitcoin Cash and Bitcoin 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.
Bitcoin vs. Dogecoin
Bitcoin vs. Litecoin
Bitcoin vs. Ethereum Classic
Bitcoin vs. Monero
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.

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