Correlation Between Bitcoin and XMR

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

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

Diversification Opportunities for Bitcoin and XMR

-0.25

Correlation Coefficient

Bitcoin  XMR

Very good diversification

The 3 months correlation between Bitcoin and XMR is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and XMR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XMR and Bitcoin 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 are associated (or correlated) with XMR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XMR has no effect on the direction of Bitcoin i.e., Bitcoin and XMR go up and down completely randomly.

Pair Corralation between Bitcoin and XMR

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.17 times more return on investment than XMR. However, Bitcoin is 1.17 times more volatile than XMR. It trades about 0.26 of its potential returns per unit of risk. XMR is currently generating about -0.03 per unit of risk. If you would invest  5,748,184  in Bitcoin on September 1, 2024 and sell it today you would earn a total of  3,944,730  from holding Bitcoin or generate 68.63% return on investment over 90 days.

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

Bitcoin  vs.  XMR

Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

XMR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XMR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, XMR is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bitcoin and XMR

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

The idea behind Bitcoin and XMR 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.