Correlation Between Bitwise Funds and Grayscale Bitcoin

Can any of the company-specific risk be diversified away by investing in both Bitwise Funds and Grayscale Bitcoin 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 Grayscale Bitcoin 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 Grayscale Bitcoin Trust, you can compare the effects of market volatilities on Bitwise Funds and Grayscale Bitcoin 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 Grayscale Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitwise Funds and Grayscale Bitcoin.

Diversification Opportunities for Bitwise Funds and Grayscale Bitcoin

0.96

Correlation Coefficient

Bitwise Funds  Grayscale Bitcoin

Almost no diversification

The 3 months correlation between Bitwise and Grayscale is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bitwise Funds Trust and Grayscale Bitcoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Bitcoin Trust 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 Grayscale Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Bitcoin Trust has no effect on the direction of Bitwise Funds i.e., Bitwise Funds and Grayscale Bitcoin go up and down completely randomly.

Pair Corralation between Bitwise Funds and Grayscale Bitcoin

Given the investment horizon of 90 days Bitwise Funds Trust is expected to generate 1.42 times more return on investment than Grayscale Bitcoin. However, Bitwise Funds is 1.42 times more volatile than Grayscale Bitcoin Trust. It trades about 0.03 of its potential returns per unit of risk. Grayscale Bitcoin Trust is currently generating about -0.03 per unit of risk. If you would invest  4,200  in Bitwise Funds Trust on September 23, 2024 and sell it today you would earn a total of  49.00  from holding Bitwise Funds Trust or generate 1.17% return on investment over 90 days.

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

Bitwise Funds Trust  vs.  Grayscale Bitcoin Trust

Bitwise Funds Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise Funds Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Bitwise Funds demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Grayscale Bitcoin Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitwise Funds and Grayscale Bitcoin

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

The idea behind Bitwise Funds Trust and Grayscale Bitcoin Trust 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.