Correlation Between Grayscale Bitcoin and Osprey Bitcoin

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

Diversification Opportunities for Grayscale Bitcoin and Osprey Bitcoin

0.44

Correlation Coefficient

Grayscale Bitcoin  Osprey Bitcoin

Very weak diversification

The 3 months correlation between Grayscale and Osprey is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Cash and Osprey Bitcoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Osprey Bitcoin 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 Osprey Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Osprey Bitcoin Trust has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Osprey Bitcoin go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and Osprey Bitcoin

Given the investment horizon of 90 days Grayscale Bitcoin is expected to generate 1.29 times less return on investment than Osprey Bitcoin. In addition to that, Grayscale Bitcoin is 2.55 times more volatile than Osprey Bitcoin Trust. It trades about 0.09 of its total potential returns per unit of risk. Osprey Bitcoin Trust is currently generating about 0.28 per unit of volatility. If you would invest  1,860  in Osprey Bitcoin Trust on September 15, 2024 and sell it today you would earn a total of  1,295  from holding Osprey Bitcoin Trust or generate 69.62% return on investment over 90 days.

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

Grayscale Bitcoin Cash  vs.  Osprey Bitcoin Trust

Grayscale Bitcoin Cash

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Cash are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Grayscale Bitcoin reported solid returns over the last few months and may actually be approaching a breakup point.

Osprey Bitcoin Trust

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Osprey Bitcoin Trust are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Osprey Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grayscale Bitcoin and Osprey Bitcoin

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

The idea behind Grayscale Bitcoin Cash and Osprey 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.