Correlation Between Compound Governance and Bitcoin Cash

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

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

Diversification Opportunities for Compound Governance and Bitcoin Cash

0.32

Correlation Coefficient

Compound Governance  Bitcoin Cash

Weak diversification

The 3 months correlation between Compound and Bitcoin is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Compound Governance Token and Bitcoin Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Cash and Compound Governance 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 Compound Governance Token are associated (or correlated) with Bitcoin Cash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Cash has no effect on the direction of Compound Governance i.e., Compound Governance and Bitcoin Cash go up and down completely randomly.

Pair Corralation between Compound Governance and Bitcoin Cash

Assuming the 90 days trading horizon Compound Governance Token is expected to under-perform the Bitcoin Cash. But the crypto coin apears to be less risky and, when comparing its historical volatility, Compound Governance Token is 1.14 times less risky than Bitcoin Cash. The crypto coin trades about -0.26 of its potential returns per unit of risk. The Bitcoin Cash is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  56,774  in Bitcoin Cash on January 27, 2024 and sell it today you would lose (9,108) from holding Bitcoin Cash or give up 16.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Compound Governance Token  vs.  Bitcoin Cash

Compound Governance Token

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Compound Governance Token are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Compound Governance exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Compound Governance and Bitcoin Cash

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

The idea behind Compound Governance Token and Bitcoin Cash 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.