Correlation Between Dogecoin and Bitcoin Cash

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

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

Diversification Opportunities for Dogecoin and Bitcoin Cash

0.95

Correlation Coefficient

Dogecoin  Bitcoin Cash

Almost no diversification

The 3 months correlation between Dogecoin and Bitcoin is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Dogecoin and Bitcoin Cash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Cash and Dogecoin 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 Dogecoin 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 Dogecoin i.e., Dogecoin and Bitcoin Cash go up and down completely randomly.

Pair Corralation between Dogecoin and Bitcoin Cash

Assuming the 90 days trading horizon Dogecoin is expected to generate 3.57 times more return on investment than Bitcoin Cash. However, Dogecoin is 3.57 times more volatile than Bitcoin Cash. It trades about 0.3 of its potential returns per unit of risk. Bitcoin Cash is currently generating about 0.35 per unit of risk. If you would invest  17.00  in Dogecoin on August 30, 2024 and sell it today you would earn a total of  23.00  from holding Dogecoin or generate 135.29% return on investment over 90 days.

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

Dogecoin  vs.  Bitcoin Cash

Dogecoin

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dogecoin are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Dogecoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bitcoin Cash

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Cash are ranked lower than 15 (%) 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 Dogecoin and Bitcoin Cash

The main advantage of trading using opposite Dogecoin and Bitcoin Cash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dogecoin 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 Dogecoin 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.