Correlation Between Ethereum Classic and SMART

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

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

Diversification Opportunities for Ethereum Classic and SMART

0.88

Correlation Coefficient

Ethereum Classic  SMART

Very poor diversification

The 3 months correlation between Ethereum and SMART is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum Classic and SMART in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMART and Ethereum Classic 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 Ethereum Classic are associated (or correlated) with SMART. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMART has no effect on the direction of Ethereum Classic i.e., Ethereum Classic and SMART go up and down completely randomly.

Pair Corralation between Ethereum Classic and SMART

Assuming the 90 days trading horizon Ethereum Classic is expected to generate 1.27 times more return on investment than SMART. However, Ethereum Classic is 1.27 times more volatile than SMART. It trades about 0.24 of its potential returns per unit of risk. SMART is currently generating about 0.22 per unit of risk. If you would invest  1,765  in Ethereum Classic on September 1, 2024 and sell it today you would earn a total of  1,507  from holding Ethereum Classic or generate 85.38% return on investment over 90 days.

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

Ethereum Classic  vs.  SMART

Ethereum Classic

Risk-Adjusted Performance

19 of 100

Solid

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

SMART

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SMART are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SMART exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum Classic and SMART

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

The idea behind Ethereum Classic and SMART 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.