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What do Dispersion Levels of Utility Tokens in our Fat Protocol Cryptofolio Tell Us about Portfolio Diversification

Oct 12, 2018

  • Today, we are following up on our blog post from last week, “We take a look at the correlations between the cryptocurrencies in our upcoming Utility Tokens Cryptofolio” with an analysis of dispersions of utility tokens in our Fat Protocol cryptofolio.  
  • Our Fat Protocol cryptofolio includes the following cryptocurrencies: Cardano (ADA), EOS (EOS), Ethereum (ETH), Ethereum Classic (ETC), Qtum (QTUM), Lisk (LSK), NEO (NEO), Ontology (ONT), Waves (WAVES), NEM (XEM), Tezos (XTZ), and Horizen (ZEN) 
  • Our Fat Protocol cryptofolio is 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 -- we will release more information about this cutting-edge AI quantitative algorithm in the coming weeks.
  • Overall dispersion of utility tokens in our Fat Protocol cryptofolio has held at moderate levels through the last 6 months -- as a comparison, the S&P 500’s dispersion levels between December 1996 and August 2013 held between 6% and 9% roughly 50% of the time, per research by S&P
  • 27.86% of the time, our Fat Protocol cryptofolio's dispersion levels held between 6% and 9% while 46.77% of the time, our Fat Protocol cryptofolio's dispersion levels held between 5% and 10%.
  • Dispersion levels of utility tokens in our Fat Protocol cryptofolio reached a high of 26.97% on October 6th, 2018 and has continued to vary heavily since -- as trading extends through October, we will keep a close eye on dispersion levels of our Fat Protocol cryptofolio to see if this trend continues. 
  • If dispersion levels of our Fat Protocol cryptofolio revert back to their mean, it will indicate a low risk/reward ratio for picking individual utility tokens, suggesting that diversifying across utility tokens would be the best way to gain exposure to the sub-class of cryptocurrencies. 

     Source: StockDio