Correlation Between Bitcoin and Andean Precious

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

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

Diversification Opportunities for Bitcoin and Andean Precious

-0.77

Correlation Coefficient

Bitcoin  Andean Precious

Pay attention - limited upside

The 3 months correlation between Bitcoin and Andean is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Andean Precious Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Andean Precious Metals and 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 Bitcoin are associated (or correlated) with Andean Precious. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Andean Precious Metals has no effect on the direction of Bitcoin i.e., Bitcoin and Andean Precious go up and down completely randomly.

Pair Corralation between Bitcoin and Andean Precious

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.79 times more return on investment than Andean Precious. However, Bitcoin is 1.79 times more volatile than Andean Precious Metals. It trades about 0.08 of its potential returns per unit of risk. Andean Precious Metals is currently generating about 0.03 per unit of risk. If you would invest  2,278,992  in Bitcoin on October 11, 2024 and sell it today you would earn a total of  6,981,707  from holding Bitcoin or generate 306.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	60.2%
Values	Daily Returns

Bitcoin  vs.  Andean Precious Metals

Bitcoin

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Andean Precious Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Andean Precious Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Bitcoin and Andean Precious

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

The idea behind Bitcoin and Andean Precious Metals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.