Correlation Between Grayscale Bitcoin and Grayscale Digital

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

By analyzing existing cross correlation between Grayscale Bitcoin Cash and Grayscale Digital Large, you can compare the effects of market volatilities on Grayscale Bitcoin and Grayscale Digital 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 Grayscale Bitcoin with a short position of Grayscale Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and Grayscale Digital.

Diversification Opportunities for Grayscale Bitcoin and Grayscale Digital

0.6

Correlation Coefficient

Grayscale Bitcoin  Grayscale Digital

Poor diversification

The 3 months correlation between Grayscale and Grayscale is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Cash and Grayscale Digital Large in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Digital Large and Grayscale Bitcoin 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 Grayscale Bitcoin Cash are associated (or correlated) with Grayscale Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Digital Large has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Grayscale Digital go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and Grayscale Digital

Given the investment horizon of 90 days Grayscale Bitcoin Cash is expected to under-perform the Grayscale Digital. In addition to that, Grayscale Bitcoin is 1.64 times more volatile than Grayscale Digital Large. It trades about -0.18 of its total potential returns per unit of risk. Grayscale Digital Large is currently generating about -0.06 per unit of volatility. If you would invest  4,100  in Grayscale Digital Large on December 30, 2024 and sell it today you would lose (623.00) from holding Grayscale Digital Large or give up 15.2% of portfolio value over 90 days.

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

Grayscale Bitcoin Cash  vs.  Grayscale Digital Large

Grayscale Bitcoin Cash

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Bitcoin Cash has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Grayscale Digital Large

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Digital Large has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Grayscale Bitcoin and Grayscale Digital

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

The idea behind Grayscale Bitcoin Cash and Grayscale Digital Large 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.