Correlation Between Bitcoin and CVP

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

By analyzing existing cross correlation between Bitcoin and CVP, you can compare the effects of market volatilities on Bitcoin and CVP 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 CVP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and CVP.

Diversification Opportunities for Bitcoin and CVP

0.26

Correlation Coefficient

Bitcoin  CVP

Modest diversification

The 3 months correlation between Bitcoin and CVP is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and CVP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVP 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 CVP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVP has no effect on the direction of Bitcoin i.e., Bitcoin and CVP go up and down completely randomly.

Pair Corralation between Bitcoin and CVP

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.1 times more return on investment than CVP. However, Bitcoin is 9.83 times less risky than CVP. It trades about -0.05 of its potential returns per unit of risk. CVP is currently generating about -0.04 per unit of risk. If you would invest  9,339,198  in Bitcoin on December 29, 2024 and sell it today you would lose (920,309) from holding Bitcoin or give up 9.85% of portfolio value over 90 days.

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

Bitcoin  vs.  CVP

Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Bitcoin shareholders.

CVP

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for CVP shareholders.

Pair Trading with Bitcoin and CVP

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

The idea behind Bitcoin and CVP 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.