Correlation Between First BITCoin and XTRA Bitcoin

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

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

Diversification Opportunities for First BITCoin and XTRA Bitcoin

0.08

Correlation Coefficient

First BITCoin  XTRA Bitcoin

Significant diversification

The 3 months correlation between First and XTRA is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding First BITCoin Capital and XTRA Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTRA Bitcoin and First 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 First BITCoin Capital are associated (or correlated) with XTRA Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTRA Bitcoin has no effect on the direction of First BITCoin i.e., First BITCoin and XTRA Bitcoin go up and down completely randomly.

Pair Corralation between First BITCoin and XTRA Bitcoin

Assuming the 90 days horizon First BITCoin Capital is expected to generate 13.89 times more return on investment than XTRA Bitcoin. However, First BITCoin is 13.89 times more volatile than XTRA Bitcoin. It trades about 0.16 of its potential returns per unit of risk. XTRA Bitcoin is currently generating about 0.03 per unit of risk. If you would invest  0.02  in First BITCoin Capital on December 25, 2024 and sell it today you would earn a total of  0.02  from holding First BITCoin Capital or generate 100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

First BITCoin Capital  vs.  XTRA Bitcoin

First BITCoin Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First BITCoin Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, First BITCoin reported solid returns over the last few months and may actually be approaching a breakup point.

XTRA Bitcoin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XTRA Bitcoin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, XTRA Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First BITCoin and XTRA Bitcoin

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

The idea behind First BITCoin Capital and XTRA Bitcoin 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.