Correlation Between Ethereum and Cronos

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

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

Diversification Opportunities for Ethereum and Cronos

0.93

Correlation Coefficient

Ethereum  Cronos

Almost no diversification

The 3 months correlation between Ethereum and Cronos is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Ethereum and Cronos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos and Ethereum 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 are associated (or correlated) with Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos has no effect on the direction of Ethereum i.e., Ethereum and Cronos go up and down completely randomly.

Pair Corralation between Ethereum and Cronos

Assuming the 90 days trading horizon Ethereum is expected to generate 2.69 times less return on investment than Cronos. But when comparing it to its historical volatility, Ethereum is 3.07 times less risky than Cronos. It trades about 0.18 of its potential returns per unit of risk. Cronos is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  7.87  in Cronos on September 1, 2024 and sell it today you would earn a total of  11.13  from holding Cronos or generate 141.42% return on investment over 90 days.

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

Ethereum  vs.  Cronos

Ethereum

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ethereum are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Cronos

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cronos are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Cronos exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ethereum and Cronos

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

The idea behind Ethereum and Cronos 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.