Understanding Portfolio Diversification Between BSV and ETC
When constructing an investment portfolio, understanding the correlation between assets like Bitcoin SV (BSV) and Ethereum Classic (ETC) is crucial for risk management. This analysis examines their 3-month relationship and diversification potential.
Key Findings
- Strong Positive Correlation (0.76): Indicates similar price movement patterns
- Diversification Limitations: High correlation reduces risk-spreading benefits
- Volatility Contrast: BSV exhibits 1.91x more volatility than ETC
Risk-Return Profile Comparison
| Metric | Bitcoin SV (BSV) | Ethereum Classic (ETC) |
|---|---|---|
| 90-Day Return | Lower | 1.75x Higher |
| Volatility | 1.91x Higher | More Stable |
| Risk-Adjusted Return | Very Weak | Insignificant |
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Practical Implications for Investors
Portfolio Construction Considerations
- Limited Diversification Benefit: The 0.76 correlation suggests substantial overlapping risk exposure
- Pair Trading Potential: Consider long BSV/short ETC positions to hedge market movements
- Volatility Management: Allocate based on individual risk tolerance
Performance Snapshot
- ETC Example: $1,407 investment in April 2025 yielded 20.75% return (90 days)
- BSV Performance: Ranked lower than 2% of global equities risk-adjusted
FAQ: Bitcoin SV and Ethereum Classic Correlation
Q: Can BSV and ETC effectively diversify my portfolio?
A: With 0.76 correlation, diversification benefits are limited - they often move similarly.
Q: Which asset has higher volatility?
A: Bitcoin SV shows 1.91x more volatility than Ethereum Classic.
Q: How does their performance compare?
A: Over 90 days, ETC generated 1.75x more return than BSV, but with less volatility.
Q: Is pair trading viable for these assets?
A: Yes, long BSV/short ETC strategies can capitalize on their correlated movements.
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Advanced Analysis Techniques
Correlation Interpretation Guide
- 1.0: Perfect positive movement
- 0.76: Strong positive relationship (BSV/ETC)
- 0.0: No relationship
- -1.0: Perfect inverse movement
Actionable Recommendations
- Monitor correlation changes quarterly
- Combine with uncorrelated assets for better diversification
- Use volatility patterns to time entries/exits
Conclusion
While BSV and ETC show strong correlation, understanding their relationship helps investors:
- Make informed allocation decisions
- Develop effective hedging strategies
- Balance risk-return profiles
Continuous monitoring remains essential as crypto market dynamics evolve.