Correlation Between Bitwise 10 and Grayscale Litecoin

Can any of the company-specific risk be diversified away by investing in both Bitwise 10 and Grayscale Litecoin 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 10 and Grayscale Litecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bitwise 10 Crypto and Grayscale Litecoin Trust, you can compare the effects of market volatilities on Bitwise 10 and Grayscale Litecoin 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 10 with a short position of Grayscale Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitwise 10 and Grayscale Litecoin.

Diversification Opportunities for Bitwise 10 and Grayscale Litecoin

0.76

Correlation Coefficient

Bitwise 10  Grayscale Litecoin

Poor diversification

The 3 months correlation between Bitwise and Grayscale is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bitwise 10 Crypto 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 Bitwise 10 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 10 Crypto are associated (or correlated) with Grayscale Litecoin. 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 Bitwise 10 i.e., Bitwise 10 and Grayscale Litecoin go up and down completely randomly.

Pair Corralation between Bitwise 10 and Grayscale Litecoin

Given the investment horizon of 90 days Bitwise 10 Crypto is expected to generate 0.45 times more return on investment than Grayscale Litecoin. However, Bitwise 10 Crypto is 2.21 times less risky than Grayscale Litecoin. It trades about 0.4 of its potential returns per unit of risk. Grayscale Litecoin Trust is currently generating about 0.13 per unit of risk. If you would invest  2,682  in Bitwise 10 Crypto on September 15, 2024 and sell it today you would earn a total of  3,813  from holding Bitwise 10 Crypto or generate 142.17% return on investment over 90 days.

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

Bitwise 10 Crypto  vs.  Grayscale Litecoin Trust

Bitwise 10 Crypto

Risk-Adjusted Performance

31 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise 10 Crypto are ranked lower than 31 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly unsteady basic indicators, Bitwise 10 showed solid returns over the last few months and may actually be approaching a breakup point.

Grayscale Litecoin Trust

Risk-Adjusted Performance

10 of 100

Good

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

Pair Trading with Bitwise 10 and Grayscale Litecoin

The main advantage of trading using opposite Bitwise 10 and Grayscale Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitwise 10 position performs unexpectedly, Grayscale Litecoin 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 will offset losses from the drop in Grayscale Litecoin's long position.

The idea behind Bitwise 10 Crypto 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.