Correlation Between Grayscale Bitcoin and Grayscale Litecoin Trust

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

Diversification Opportunities for Grayscale Bitcoin and Grayscale Litecoin Trust

0.72

Correlation Coefficient

Grayscale Bitcoin  Grayscale Litecoin Trust

Poor diversification

The 3 months correlation between Grayscale and Grayscale is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Cash and Grayscale Litecoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Litecoin Trust 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 Litecoin Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Litecoin Trust has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Grayscale Litecoin Trust go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and Grayscale Litecoin Trust

Given the investment horizon of 90 days Grayscale Bitcoin Cash is expected to under-perform the Grayscale Litecoin Trust. But the otc stock apears to be less risky and, when comparing its historical volatility, Grayscale Bitcoin Cash is 1.21 times less risky than Grayscale Litecoin Trust. The otc stock trades about -0.18 of its potential returns per unit of risk. The Grayscale Litecoin Trust is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,329  in Grayscale Litecoin Trust on December 30, 2024 and sell it today you would lose (609.00) from holding Grayscale Litecoin Trust or give up 45.82% 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 Litecoin Trust

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 Litecoin Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Litecoin Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Grayscale Bitcoin and Grayscale Litecoin Trust

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

The idea behind Grayscale Bitcoin Cash and Grayscale Litecoin 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.