Correlation Between ProShares Bitcoin and SPDR Galaxy

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

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

Diversification Opportunities for ProShares Bitcoin and SPDR Galaxy

0.93

Correlation Coefficient

ProShares Bitcoin  SPDR Galaxy

Almost no diversification

The 3 months correlation between ProShares and SPDR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Bitcoin Strategy and SPDR Galaxy Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Digital and ProShares 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 ProShares Bitcoin Strategy are associated (or correlated) with SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Digital has no effect on the direction of ProShares Bitcoin i.e., ProShares Bitcoin and SPDR Galaxy go up and down completely randomly.

Pair Corralation between ProShares Bitcoin and SPDR Galaxy

Given the investment horizon of 90 days ProShares Bitcoin Strategy is expected to generate 0.85 times more return on investment than SPDR Galaxy. However, ProShares Bitcoin Strategy is 1.18 times less risky than SPDR Galaxy. It trades about -0.04 of its potential returns per unit of risk. SPDR Galaxy Digital is currently generating about -0.08 per unit of risk. If you would invest  2,567  in ProShares Bitcoin Strategy on September 23, 2024 and sell it today you would lose (95.00) from holding ProShares Bitcoin Strategy or give up 3.7% of portfolio value over 90 days.

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

ProShares Bitcoin Strategy  vs.  SPDR Galaxy Digital

ProShares Bitcoin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Bitcoin Strategy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, ProShares Bitcoin displayed solid returns over the last few months and may actually be approaching a breakup point.

SPDR Galaxy Digital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Galaxy Digital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, SPDR Galaxy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProShares Bitcoin and SPDR Galaxy

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

The idea behind ProShares Bitcoin Strategy and SPDR Galaxy Digital 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.