Correlation Between Cosmos and Ethereum

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

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

Diversification Opportunities for Cosmos and Ethereum

0.78

Correlation Coefficient

Cosmos  Ethereum

Poor diversification

The 3 months correlation between Cosmos and Ethereum is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cosmos and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum 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 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 Cosmos i.e., Cosmos and Ethereum go up and down completely randomly.

Pair Corralation between Cosmos and Ethereum

Assuming the 90 days trading horizon Cosmos is expected to generate 2.0 times less return on investment than Ethereum. In addition to that, Cosmos is 1.28 times more volatile than Ethereum. It trades about 0.06 of its total potential returns per unit of risk. Ethereum is currently generating about 0.14 per unit of volatility. If you would invest  177,659  in Ethereum on January 25, 2024 and sell it today you would earn a total of  142,994  from holding Ethereum or generate 80.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.22%
Values	Daily Returns

Cosmos  vs.  Ethereum

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.

Ethereum

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cosmos and Ethereum

The main advantage of trading using opposite Cosmos and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cosmos 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.

The idea behind Cosmos 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.