Correlation Between Dogecoin and XWC

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

Diversification Opportunities for Dogecoin and XWC

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Dogecoin and XWC is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Dogecoin and XWC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XWC and Dogecoin 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 Dogecoin are associated (or correlated) with XWC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XWC has no effect on the direction of Dogecoin i.e., Dogecoin and XWC go up and down completely randomly.

Pair Corralation between Dogecoin and XWC

Assuming the 90 days trading horizon Dogecoin is expected to under-perform the XWC. But the crypto coin apears to be less risky and, when comparing its historical volatility, Dogecoin is 6.99 times less risky than XWC. The crypto coin trades about -0.01 of its potential returns per unit of risk. The XWC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  21.00  in XWC on September 1, 2022 and sell it today you would lose (17.69)  from holding XWC or give up 84.24% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy56.53%
ValuesDaily Returns

Dogecoin  vs.  XWC

 Performance (%) 
       Timeline  
Dogecoin 
Dogecoin Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Dogecoin are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Dogecoin sustained solid returns over the last few months and may actually be approaching a breakup point.

Dogecoin Price Channel

XWC 
XWC Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in XWC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, XWC sustained solid returns over the last few months and may actually be approaching a breakup point.

XWC Price Channel

Dogecoin and XWC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dogecoin and XWC

The main advantage of trading using opposite Dogecoin and XWC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dogecoin position performs unexpectedly, XWC 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 XWC will offset losses from the drop in XWC's long position.
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The idea behind Dogecoin and XWC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.

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