Correlation Between Avalanche and Coinbase Wrapped

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

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

Diversification Opportunities for Avalanche and Coinbase Wrapped

0.95

Correlation Coefficient

Avalanche  Coinbase Wrapped

Almost no diversification

The 3 months correlation between Avalanche and Coinbase is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Avalanche and Coinbase Wrapped Staked in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coinbase Wrapped Staked and Avalanche 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 Avalanche are associated (or correlated) with Coinbase Wrapped. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coinbase Wrapped Staked has no effect on the direction of Avalanche i.e., Avalanche and Coinbase Wrapped go up and down completely randomly.

Pair Corralation between Avalanche and Coinbase Wrapped

Assuming the 90 days trading horizon Avalanche is expected to generate 1.43 times more return on investment than Coinbase Wrapped. However, Avalanche is 1.43 times more volatile than Coinbase Wrapped Staked. It trades about 0.24 of its potential returns per unit of risk. Coinbase Wrapped Staked is currently generating about 0.2 per unit of risk. If you would invest  2,138  in Avalanche on September 1, 2024 and sell it today you would earn a total of  2,347  from holding Avalanche or generate 109.78% return on investment over 90 days.

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

Avalanche  vs.  Coinbase Wrapped Staked

Avalanche

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avalanche are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Avalanche exhibited solid returns over the last few months and may actually be approaching a breakup point.

Coinbase Wrapped Staked

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coinbase Wrapped Staked are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Coinbase Wrapped exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avalanche and Coinbase Wrapped

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

The idea behind Avalanche and Coinbase Wrapped Staked 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.