Correlation Between Ethereum Classic and Arweave

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

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

Diversification Opportunities for Ethereum Classic and Arweave

0.95

Correlation Coefficient

Ethereum Classic  Arweave

Almost no diversification

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

Pair Corralation between Ethereum Classic and Arweave

Assuming the 90 days trading horizon Ethereum Classic is expected to generate 0.72 times more return on investment than Arweave. However, Ethereum Classic is 1.38 times less risky than Arweave. It trades about -0.02 of its potential returns per unit of risk. Arweave is currently generating about -0.07 per unit of risk. If you would invest  2,540  in Ethereum Classic on November 19, 2024 and sell it today you would lose (458.00) from holding Ethereum Classic or give up 18.03% of portfolio value over 90 days.

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

Ethereum Classic  vs.  Arweave

Ethereum Classic

Risk-Adjusted Performance

Weak

Over the last 90 days Ethereum Classic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Ethereum Classic shareholders.

Arweave

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arweave has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for Arweave shareholders.

Pair Trading with Ethereum Classic and Arweave

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

The idea behind Ethereum Classic and Arweave 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.