Correlation Between Bitcoin and Bitcoin Cash

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

Diversification Opportunities for Bitcoin and Bitcoin Cash

0.97
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Bitcoin and Bitcoin is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Bitcoin Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Cash and Bitcoin 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 are associated (or correlated) with Bitcoin Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Cash has no effect on the direction of Bitcoin i.e., Bitcoin and Bitcoin Cash go up and down completely randomly.

Pair Corralation between Bitcoin and Bitcoin Cash

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.84 times more return on investment than Bitcoin Cash. However, Bitcoin is 1.19 times less risky than Bitcoin Cash. It trades about 0.05 of its potential returns per unit of risk. Bitcoin Cash is currently generating about -0.1 per unit of risk. If you would invest  1,133,102  in Bitcoin on May 18, 2022 and sell it today you would earn a total of  1,251,205  from holding Bitcoin or generate 110.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy41.72%
ValuesDaily Returns

Bitcoin  vs.  Bitcoin Cash

 Performance (%) 
       Timeline  
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 weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for Bitcoin investors.

Bitcoin Price Channel

Bitcoin Cash 
Bitcoin Performance
0 of 100
Over the last 90 days Bitcoin Cash has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's fundamental indicators remain somewhat strong which may send shares a bit higher in September 2022. The current disturbance may also be a sign of long term up-swing for Bitcoin Cash investors.

Bitcoin Price Channel

Bitcoin and Bitcoin Cash Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bitcoin and Bitcoin Cash

The main advantage of trading using opposite Bitcoin and Bitcoin Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, Bitcoin Cash 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 Cash will offset losses from the drop in Bitcoin Cash's long position.
The idea behind Bitcoin and Bitcoin Cash 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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