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We take a look at the correlations between the cryptocurrencies in our upcoming Utility Tokens Cryptfolio

Oct 05, 2018

  • As a follow-up to our blog post yesterday, "Ever wonder what the average pairwise correlation is for the Top 25 cryptocurrencies? We decided to find out," we decided to take a look at the constituents of our soon to be released Fat Protocol Cryptofolio and measure the average pairwise correlations among them.
  • Our Fat Protocol, or utility tokens, cryptfolio will be made up of the following cryptocurrencies: Cardano (ADA), EOS (EOS), Ethereum (ETH), Lisk (LSK), NEO (NEO), Ontology (ONT), Waves (WAVES), NEM (XEM), Tezos (XTZ), and Horizen (ZEN)
  • The cryptfolio will be based on our new hierarchal risk parity algorithm that uses AI clustering techniques to maximize returns and lower overall portfolio volatility to deliver superior Sharpe ratios for portfolios holding cryptocurrencies – more to come on this cutting-edge AI quantitative algorithm in the coming weeks
  • While it isn’t shocking to see high correlations among the utility tokens, two major observations stick out:
  • Average pairwise correlations for the group of cryptocurrencies is LOWER than the average pairwise correlations of the top 25 cryptocurrencies on
  • Correlations have been steadily heading higher for this group of cryptocurrencies after a drop in August 2018
  • The volatility in correlations supports our thesis that a properly diversified cryptfolio of utility tokens will offer an attractive risk/reward for non-traders of cryptocurrencies
  • In our next post, we plan to look at the average dispersion of the group to determine whether there is any benefit from picking individual cryptocurrencies in utility tokens space

     Source: StockDio

     Source: StockDio