Correlation Between Cosmos and Binance Coin

Can any of the company-specific risk be diversified away by investing in both Cosmos and Binance Coin 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 Cosmos and Binance Coin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cosmos and Binance Coin, you can compare the effects of market volatilities on Cosmos and Binance Coin 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 Cosmos with a short position of Binance Coin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cosmos and Binance Coin.

Diversification Opportunities for Cosmos and Binance Coin

0.39

Correlation Coefficient

Cosmos  Binance Coin

Weak diversification

The 3 months correlation between Cosmos and Binance is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Binance Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binance Coin and Cosmos 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 Cosmos are associated (or correlated) with Binance Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binance Coin has no effect on the direction of Cosmos i.e., Cosmos and Binance Coin go up and down completely randomly.

Pair Corralation between Cosmos and Binance Coin

Assuming the 90 days trading horizon Cosmos is expected to under-perform the Binance Coin. In addition to that, Cosmos is 1.38 times more volatile than Binance Coin. It trades about -0.28 of its total potential returns per unit of risk. Binance Coin is currently generating about 0.06 per unit of volatility. If you would invest  58,029  in Binance Coin on January 25, 2024 and sell it today you would earn a total of  2,201  from holding Binance Coin or generate 3.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Cosmos  vs.  Binance Coin

Cosmos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cosmos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cosmos is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Binance Coin

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Binance Coin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos and Binance Coin

The main advantage of trading using opposite Cosmos and Binance Coin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos position performs unexpectedly, Binance Coin 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 Binance Coin will offset losses from the drop in Binance Coin's long position.

The idea behind Cosmos and Binance Coin 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 the Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.