Correlation Between Bitwise Crypto and ARK 21Shares

Can any of the company-specific risk be diversified away by investing in both Bitwise Crypto and ARK 21Shares 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 Bitwise Crypto and ARK 21Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bitwise Crypto Industry and ARK 21Shares Active, you can compare the effects of market volatilities on Bitwise Crypto and ARK 21Shares 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 Bitwise Crypto with a short position of ARK 21Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitwise Crypto and ARK 21Shares.

Diversification Opportunities for Bitwise Crypto and ARK 21Shares

0.96

Correlation Coefficient

Bitwise Crypto  ARK 21Shares

Almost no diversification

The 3 months correlation between Bitwise and ARK is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Bitwise Crypto Industry and ARK 21Shares Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK 21Shares Active and Bitwise Crypto 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 Bitwise Crypto Industry are associated (or correlated) with ARK 21Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK 21Shares Active has no effect on the direction of Bitwise Crypto i.e., Bitwise Crypto and ARK 21Shares go up and down completely randomly.

Pair Corralation between Bitwise Crypto and ARK 21Shares

Given the investment horizon of 90 days Bitwise Crypto Industry is expected to generate 1.34 times more return on investment than ARK 21Shares. However, Bitwise Crypto is 1.34 times more volatile than ARK 21Shares Active. It trades about -0.08 of its potential returns per unit of risk. ARK 21Shares Active is currently generating about -0.12 per unit of risk. If you would invest  1,718  in Bitwise Crypto Industry on December 28, 2024 and sell it today you would lose (376.00) from holding Bitwise Crypto Industry or give up 21.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Bitwise Crypto Industry  vs.  ARK 21Shares Active

Bitwise Crypto Industry

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitwise Crypto Industry has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Etf's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the ETF retail investors.

ARK 21Shares Active

Risk-Adjusted Performance

Very Weak

Over the last 90 days ARK 21Shares Active has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Etf's forward-looking signals remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Bitwise Crypto and ARK 21Shares

The main advantage of trading using opposite Bitwise Crypto and ARK 21Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitwise Crypto position performs unexpectedly, ARK 21Shares 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 ARK 21Shares will offset losses from the drop in ARK 21Shares' long position.

The idea behind Bitwise Crypto Industry and ARK 21Shares Active 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.