Correlation Between Bitcoin and Dogecoin

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

Diversification Opportunities for Bitcoin and Dogecoin

0.83
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bitcoin and Dogecoin is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Dogecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dogecoin 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 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 Bitcoin i.e., Bitcoin and Dogecoin go up and down completely randomly.

Pair Corralation between Bitcoin and Dogecoin

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.79 times more return on investment than Dogecoin. However, Bitcoin is 1.26 times less risky than Dogecoin. It trades about 0.05 of its potential returns per unit of risk. Dogecoin is currently generating about -0.06 per unit of risk. If you would invest  1,136,765  in Bitcoin on July 8, 2022 and sell it today you would earn a total of  859,229  from holding Bitcoin or generate 75.59% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy48.93%
ValuesDaily Returns

Bitcoin  vs.  Dogecoin

 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 somewhat strong basic indicators, Bitcoin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bitcoin Price Channel

Dogecoin 
Dogecoin Performance
0 of 100
Over the last 90 days Dogecoin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Dogecoin is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Dogecoin Price Channel

Bitcoin and Dogecoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bitcoin and Dogecoin

The main advantage of trading using opposite Bitcoin and Dogecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin 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.
Bitcoin vs. Dogecoin
Bitcoin vs. Litecoin
Bitcoin vs. Ethereum Classic
Bitcoin vs. Monero
The idea behind Bitcoin 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.
Dogecoin vs. Bitcoin
Dogecoin vs. Litecoin
Dogecoin vs. Ethereum Classic
Dogecoin 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 Valuation module to check real value of public entities based on technical and fundamental data.

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