Correlation Between NEM and Bitcoin Cash

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

Diversification Opportunities for NEM and Bitcoin Cash

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between NEM and Bitcoin is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NEM and Bitcoin Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Cash and NEM 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 NEM 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 NEM i.e., NEM and Bitcoin Cash go up and down completely randomly.

Pair Corralation between NEM and Bitcoin Cash

Assuming the 90 days trading horizon NEM is expected to generate 2.54 times less return on investment than Bitcoin Cash. But when comparing it to its historical volatility, NEM is 1.76 times less risky than Bitcoin Cash. It trades about 0.17 of its potential returns per unit of risk. Bitcoin Cash is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  29,679  in Bitcoin Cash on December 29, 2023 and sell it today you would earn a total of  24,664  from holding Bitcoin Cash or generate 83.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

NEM  vs.  Bitcoin Cash

 Performance 
       Timeline  
NEM 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in NEM are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, NEM exhibited solid returns over the last few months and may actually be approaching a breakup point.
Bitcoin Cash 

Risk-Adjusted Performance

12 of 100

 
Low
 
High
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.

NEM and Bitcoin Cash Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with NEM and Bitcoin Cash

The main advantage of trading using opposite NEM and Bitcoin Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NEM 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 NEM 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.
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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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