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

0.86
  Correlation Coefficient

Very poor diversification

The 1 month correlation between Monero and Bitcoin is 0.86. 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 1.44 times more return on investment than Bitcoin. However, Monero is 1.44 times more volatile than Bitcoin. It trades about 0.01 of its potential returns per unit of risk. Bitcoin is currently generating about -0.09 per unit of risk. If you would invest  18,946  in Monero on May 14, 2022 and sell it today you would lose (2,891)  from holding Monero or give up 15.26% of portfolio value over 90 days.
Time Period1 Month [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Monero  vs.  Bitcoin

 Performance (%) 
       Timeline  
Monero 
Monero Performance
22 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Monero are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Monero sustained solid returns over the last few months and may actually be approaching a breakup point.

Monero Price Channel

Bitcoin 
Bitcoin Performance
16 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Bitcoin sustained solid returns over the last few months and may actually be approaching a breakup point.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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