Correlation Between Ethereum and Avalanche

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

Diversification Opportunities for Ethereum and Avalanche

0.86
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ethereum and Avalanche is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Avalanche in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalanche and Ethereum 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 are associated (or correlated) with Avalanche. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalanche has no effect on the direction of Ethereum i.e., Ethereum and Avalanche go up and down completely randomly.

Pair Corralation between Ethereum and Avalanche

Assuming the 90 days trading horizon Ethereum is expected to generate 0.85 times more return on investment than Avalanche. However, Ethereum is 1.18 times less risky than Avalanche. It trades about -0.01 of its potential returns per unit of risk. Avalanche is currently generating about -0.07 per unit of risk. If you would invest  133,422  in Ethereum on September 8, 2022 and sell it today you would lose (6,597)  from holding Ethereum or give up 4.94% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ethereum  vs.  Avalanche

 Performance (%) 
       Timeline  
Ethereum 
Ethereum Performance
0 of 100
Over the last 90 days Ethereum 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 January 2023. The current disturbance may also be a sign of long term up-swing for Ethereum investors.

Ethereum Price Channel

Avalanche 
Avalanche Performance
0 of 100
Over the last 90 days Avalanche 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 January 2023. The current disturbance may also be a sign of long term up-swing for Avalanche investors.

Avalanche Price Channel

Ethereum and Avalanche Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ethereum and Avalanche

The main advantage of trading using opposite Ethereum and Avalanche positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum position performs unexpectedly, Avalanche 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 Avalanche will offset losses from the drop in Avalanche's long position.
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The idea behind Ethereum and Avalanche 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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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.

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