Correlation Between Bitcoin Cash and NEO

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

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

Diversification Opportunities for Bitcoin Cash and NEO

0.78

Correlation Coefficient

Bitcoin Cash  NEO

Poor diversification

The 3 months correlation between Bitcoin and NEO is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and NEO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEO and Bitcoin Cash 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 Bitcoin Cash are associated (or correlated) with NEO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEO has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and NEO go up and down completely randomly.

Pair Corralation between Bitcoin Cash and NEO

Assuming the 90 days trading horizon Bitcoin Cash is expected to under-perform the NEO. But the crypto coin apears to be less risky and, when comparing its historical volatility, Bitcoin Cash is 1.33 times less risky than NEO. The crypto coin trades about -0.01 of its potential returns per unit of risk. The NEO is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,571  in NEO on January 26, 2024 and sell it today you would earn a total of  235.00  from holding NEO or generate 14.96% return on investment over 90 days.

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

Bitcoin Cash  vs.  NEO

Bitcoin Cash

Risk-Adjusted Performance

12 of 100

Good

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

NEO

Risk-Adjusted Performance

12 of 100

Good

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

Pair Trading with Bitcoin Cash and NEO

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

The idea behind Bitcoin Cash and NEO 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.