Correlation Between Cardano and Ethereum

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

Diversification Opportunities for Cardano and Ethereum

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Cardano and Ethereum is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Cardano and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Cardano 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 Cardano are associated (or correlated) with Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum has no effect on the direction of Cardano i.e., Cardano and Ethereum go up and down completely randomly.

Pair Corralation between Cardano and Ethereum

Assuming the 90 days trading horizon Cardano is expected to under-perform the Ethereum. But the crypto coin apears to be less risky and, when comparing its historical volatility, Cardano is 1.06 times less risky than Ethereum. The crypto coin trades about -0.08 of its potential returns per unit of risk. The Ethereum is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  54,414  in Ethereum on September 1, 2022 and sell it today you would earn a total of  67,293  from holding Ethereum or generate 123.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy56.53%
ValuesDaily Returns

Cardano  vs.  Ethereum

 Performance (%) 
       Timeline  
Cardano 
Cardano Performance
0 of 100
Over the last 90 days Cardano 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 fundamental indicators remain somewhat strong which may send shares a bit higher in December 2022. The current disturbance may also be a sign of long term up-swing for Cardano investors.

Cardano Price Channel

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 December 2022. The current disturbance may also be a sign of long term up-swing for Ethereum investors.

Ethereum Price Channel

Cardano and Ethereum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cardano and Ethereum

The main advantage of trading using opposite Cardano and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardano position performs unexpectedly, Ethereum 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 Ethereum will offset losses from the drop in Ethereum's long position.
Cardano vs. Ethereum
Cardano vs. Avalanche
Cardano vs. Cosmos
Cardano vs. Cronos
The idea behind Cardano and Ethereum 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.
Ethereum vs. Cardano
Ethereum vs. Avalanche
Ethereum vs. Cosmos
Ethereum vs. Cronos
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 Analyst Recommendations module to analyst recommendations and target price estimates broken down by several categories.

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