Correlation Between Monero and Bitcoin

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

Diversification Opportunities for Monero and Bitcoin

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Monero and Bitcoin is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Monero and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin and Monero 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 Monero 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 Monero i.e., Monero and Bitcoin go up and down completely randomly.

Pair Corralation between Monero and Bitcoin

Assuming the 90 days trading horizon Monero is expected to generate 0.87 times more return on investment than Bitcoin. However, Monero is 1.15 times less risky than Bitcoin. It trades about 0.28 of its potential returns per unit of risk. Bitcoin is currently generating about 0.22 per unit of risk. If you would invest  13,879  in Monero on May 15, 2022 and sell it today you would earn a total of  2,665  from holding Monero or generate 19.2% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Monero  vs.  Bitcoin

 Performance (%) 
       Timeline  
Monero 
Monero Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Monero are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Monero may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Monero 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

Monero and Bitcoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Monero and Bitcoin

The main advantage of trading using opposite Monero and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monero 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 Monero 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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