Correlation Between Ethereum and Algorand

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

Diversification Opportunities for Ethereum and Algorand

0.4
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Ethereum and Algorand is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Algorand in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algorand 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 Algorand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algorand has no effect on the direction of Ethereum i.e., Ethereum and Algorand go up and down completely randomly.

Pair Corralation between Ethereum and Algorand

Assuming the 90 days trading horizon Ethereum is expected to generate 1.06 times more return on investment than Algorand. However, Ethereum is 1.06 times more volatile than Algorand. It trades about 0.06 of its potential returns per unit of risk. Algorand is currently generating about -0.08 per unit of risk. If you would invest  56,826  in Ethereum on September 2, 2022 and sell it today you would earn a total of  72,545  from holding Ethereum or generate 127.66% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy56.73%
ValuesDaily Returns

Ethereum  vs.  Algorand

 Performance (%) 
       Timeline  
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 latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Ethereum investors.

Ethereum Price Channel

Algorand 
Algorand Performance
0 of 100
Over the last 90 days Algorand has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Algorand is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Algorand Price Channel

Ethereum and Algorand Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ethereum and Algorand

The main advantage of trading using opposite Ethereum and Algorand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ethereum position performs unexpectedly, Algorand 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 Algorand will offset losses from the drop in Algorand's long position.
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The idea behind Ethereum and Algorand 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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