Correlation Between Bitwise Funds and VanEck Ethereum

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

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

Diversification Opportunities for Bitwise Funds and VanEck Ethereum

0.97

Correlation Coefficient

Bitwise Funds  VanEck Ethereum

Almost no diversification

The 3 months correlation between Bitwise and VanEck is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Bitwise Funds Trust and VanEck Ethereum ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Ethereum ETF and Bitwise Funds 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 Bitwise Funds Trust are associated (or correlated) with VanEck Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Ethereum ETF has no effect on the direction of Bitwise Funds i.e., Bitwise Funds and VanEck Ethereum go up and down completely randomly.

Pair Corralation between Bitwise Funds and VanEck Ethereum

Given the investment horizon of 90 days Bitwise Funds Trust is expected to generate 0.92 times more return on investment than VanEck Ethereum. However, Bitwise Funds Trust is 1.09 times less risky than VanEck Ethereum. It trades about 0.04 of its potential returns per unit of risk. VanEck Ethereum ETF is currently generating about 0.02 per unit of risk. If you would invest  3,062  in Bitwise Funds Trust on October 5, 2024 and sell it today you would earn a total of  644.00  from holding Bitwise Funds Trust or generate 21.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	42.91%
Values	Daily Returns

Bitwise Funds Trust  vs.  VanEck Ethereum ETF

Bitwise Funds Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise Funds Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Bitwise Funds demonstrated solid returns over the last few months and may actually be approaching a breakup point.

VanEck Ethereum ETF

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Ethereum ETF are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical indicators, VanEck Ethereum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitwise Funds and VanEck Ethereum

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

The idea behind Bitwise Funds Trust and VanEck Ethereum ETF 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.