Correlation Between Bit Digital and Futu Holdings

Can any of the company-specific risk be diversified away by investing in both Bit Digital and Futu Holdings 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 Bit Digital and Futu Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Bit Digital and Futu Holdings

-0.75

Correlation Coefficient

Bit Digital  Futu Holdings

Pay attention - limited upside

The 3 months correlation between Bit and Futu is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bit Digital and Futu Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Futu Holdings and Bit Digital 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 Bit Digital are associated (or correlated) with Futu Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Futu Holdings has no effect on the direction of Bit Digital i.e., Bit Digital and Futu Holdings go up and down completely randomly.

Pair Corralation between Bit Digital and Futu Holdings

Given the investment horizon of 90 days Bit Digital is expected to under-perform the Futu Holdings. In addition to that, Bit Digital is 1.3 times more volatile than Futu Holdings. It trades about -0.07 of its total potential returns per unit of risk. Futu Holdings is currently generating about 0.12 per unit of volatility. If you would invest  8,283  in Futu Holdings on December 27, 2024 and sell it today you would earn a total of  2,516  from holding Futu Holdings or generate 30.38% return on investment over 90 days.

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

Bit Digital  vs.  Futu Holdings

Bit Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bit Digital 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 Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Futu Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Futu Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Futu Holdings unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bit Digital and Futu Holdings

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

The idea behind Bit Digital and Futu Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.