Correlation Between Bitcoin and DR Horton

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

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

Diversification Opportunities for Bitcoin and DR Horton

-0.15

Correlation Coefficient

Bitcoin  DR Horton

Good diversification

The 3 months correlation between Bitcoin and D1HI34 is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and DR Horton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DR Horton 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 DR Horton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DR Horton has no effect on the direction of Bitcoin i.e., Bitcoin and DR Horton go up and down completely randomly.

Pair Corralation between Bitcoin and DR Horton

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.41 times more return on investment than DR Horton. However, Bitcoin is 1.41 times more volatile than DR Horton. It trades about 0.21 of its potential returns per unit of risk. DR Horton is currently generating about -0.12 per unit of risk. If you would invest  7,671,641  in Bitcoin on October 9, 2024 and sell it today you would earn a total of  2,551,359  from holding Bitcoin or generate 33.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Bitcoin  vs.  DR Horton

Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 20 (%) 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.

DR Horton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DR Horton has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's technical indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Bitcoin and DR Horton

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

The idea behind Bitcoin and DR Horton 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.