Correlation Between Bitcoin and DGB

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

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

Diversification Opportunities for Bitcoin and DGB

0.18

Correlation Coefficient

Bitcoin  DGB

Average diversification

The 3 months correlation between Bitcoin and DGB is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and DGB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DGB 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 DGB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DGB has no effect on the direction of Bitcoin i.e., Bitcoin and DGB go up and down completely randomly.

Pair Corralation between Bitcoin and DGB

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.1 times less return on investment than DGB. But when comparing it to its historical volatility, Bitcoin is 4.13 times less risky than DGB. It trades about 0.03 of its potential returns per unit of risk. DGB is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.07  in DGB on November 19, 2024 and sell it today you would lose (0.21) from holding DGB or give up 19.71% of portfolio value over 90 days.

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

Bitcoin  vs.  DGB

Bitcoin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Bitcoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DGB

Risk-Adjusted Performance

Very Weak

Over the last 90 days DGB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, DGB is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bitcoin and DGB

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

The idea behind Bitcoin and DGB 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.