Correlation Between Litecoin and Dogecoin

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

Diversification Opportunities for Litecoin and Dogecoin

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Litecoin and Dogecoin is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Litecoin and Dogecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dogecoin and Litecoin 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 Litecoin 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 Litecoin i.e., Litecoin and Dogecoin go up and down completely randomly.

Pair Corralation between Litecoin and Dogecoin

Assuming the 90 days trading horizon Litecoin is expected to under-perform the Dogecoin. But the crypto coin apears to be less risky and, when comparing its historical volatility, Litecoin is 1.08 times less risky than Dogecoin. The crypto coin trades about -0.07 of its potential returns per unit of risk. The Dogecoin is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  24.00  in Dogecoin on July 8, 2022 and sell it today you would lose (17.64)  from holding Dogecoin or give up 73.5% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Litecoin  vs.  Dogecoin

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

Litecoin 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

Litecoin and Dogecoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Litecoin and Dogecoin

The main advantage of trading using opposite Litecoin and Dogecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Litecoin 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.
Litecoin vs. Bitcoin
Litecoin vs. Dogecoin
Litecoin vs. Ethereum Classic
Litecoin vs. Monero
The idea behind Litecoin 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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