Correlation Between Ethereum and Bitcoin

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Ethereum 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 Ethereum and Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ethereum and Bitcoin, you can compare the effects of market volatilities on Ethereum 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 Ethereum with a short position of Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ethereum and Bitcoin.

Diversification Opportunities for Ethereum and Bitcoin

0.87
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Ethereum and Bitcoin is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin 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 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 Ethereum i.e., Ethereum and Bitcoin go up and down completely randomly.

Pair Corralation between Ethereum and Bitcoin

Assuming the 90 days trading horizon Ethereum is expected to generate 1.52 times more return on investment than Bitcoin. However, Ethereum is 1.52 times more volatile than Bitcoin. It trades about 0.19 of its potential returns per unit of risk. Bitcoin is currently generating about 0.06 per unit of risk. If you would invest  123,689  in Ethereum on May 15, 2022 and sell it today you would earn a total of  69,314  from holding Ethereum or generate 56.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Ethereum  vs.  Bitcoin

 Performance (%) 
       Timeline  
Ethereum 
Ethereum Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Ethereum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ethereum 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 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

Ethereum and Bitcoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ethereum and Bitcoin

The main advantage of trading using opposite Ethereum and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum 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.
The idea behind Ethereum 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.
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.

Other Complementary Tools

Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Financial Widgets
Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets
Go
ETF Directory
Find actively traded Exchange Traded Funds (ETF) from around the world
Go
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Go
Price Exposure Probability
Analyze equity upside and downside potential for a given time horizon across multiple markets
Go