Correlation Between Tezos and Ethereum Classic

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

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

Diversification Opportunities for Tezos and Ethereum Classic

0.95

Correlation Coefficient

Tezos  Ethereum Classic

Almost no diversification

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

Pair Corralation between Tezos and Ethereum Classic

Assuming the 90 days trading horizon Tezos is expected to under-perform the Ethereum Classic. But the crypto coin apears to be less risky and, when comparing its historical volatility, Tezos is 1.05 times less risky than Ethereum Classic. The crypto coin trades about -0.22 of its potential returns per unit of risk. The Ethereum Classic is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,498  in Ethereum Classic on December 30, 2024 and sell it today you would lose (842.00) from holding Ethereum Classic or give up 33.71% of portfolio value over 90 days.

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

Tezos  vs.  Ethereum Classic

Tezos

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tezos 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 basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Tezos shareholders.

Ethereum Classic

Risk-Adjusted Performance

Very 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 unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Ethereum Classic shareholders.

Pair Trading with Tezos and Ethereum Classic

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

The idea behind Tezos and Ethereum Classic 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.