Correlation Between Bitcoin Cash and NEM

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

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

Diversification Opportunities for Bitcoin Cash and NEM

0.57

Correlation Coefficient

Bitcoin Cash  NEM

Very weak diversification

The 3 months correlation between Bitcoin and NEM is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Cash and NEM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEM 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 NEM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEM has no effect on the direction of Bitcoin Cash i.e., Bitcoin Cash and NEM go up and down completely randomly.

Pair Corralation between Bitcoin Cash and NEM

Assuming the 90 days trading horizon Bitcoin Cash is expected to generate 1.33 times more return on investment than NEM. However, Bitcoin Cash is 1.33 times more volatile than NEM. It trades about 0.11 of its potential returns per unit of risk. NEM is currently generating about 0.02 per unit of risk. If you would invest  12,029  in Bitcoin Cash on January 19, 2024 and sell it today you would earn a total of  35,003  from holding Bitcoin Cash or generate 290.99% return on investment over 90 days.

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

Bitcoin Cash  vs.  NEM

Bitcoin Cash

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Cash are ranked lower than 11 (%) 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.

NEM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NEM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for NEM shareholders.

Pair Trading with Bitcoin Cash and NEM

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

The idea behind Bitcoin Cash and NEM 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.