Correlation Between Binance Coin and Ethereum

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Can any of the company-specific risk be diversified away by investing in both Binance Coin 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 Binance Coin and Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binance Coin and Ethereum, you can compare the effects of market volatilities on Binance Coin 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 Binance Coin with a short position of Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binance Coin and Ethereum.

Diversification Opportunities for Binance Coin and Ethereum

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Binance and Ethereum is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Binance Coin 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 Binance Coin 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 Binance Coin i.e., Binance Coin and Ethereum go up and down completely randomly.

Pair Corralation between Binance Coin and Ethereum

Assuming the 90 days trading horizon Binance Coin is expected to generate 1.44 times more return on investment than Ethereum. However, Binance Coin is 1.44 times more volatile than Ethereum. It trades about 0.26 of its potential returns per unit of risk. Ethereum is currently generating about 0.07 per unit of risk. If you would invest  41,517  in Binance Coin on December 29, 2023 and sell it today you would earn a total of  16,683  from holding Binance Coin or generate 40.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Binance Coin  vs.  Ethereum

 Performance 
       Timeline  
Binance Coin 

Risk-Adjusted Performance

18 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Binance Coin are ranked lower than 18 (%) 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.
Ethereum 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 15 (%) 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.

Binance Coin and Ethereum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Binance Coin and Ethereum

The main advantage of trading using opposite Binance Coin and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binance Coin 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 Binance Coin 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.
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.

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