Correlation Between Bitcoin and EuroSite Power

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

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

Diversification Opportunities for Bitcoin and EuroSite Power

0.32

Correlation Coefficient

Bitcoin  EuroSite Power

Weak diversification

The 3 months correlation between Bitcoin and EuroSite is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and EuroSite Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EuroSite Power 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 EuroSite Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EuroSite Power has no effect on the direction of Bitcoin i.e., Bitcoin and EuroSite Power go up and down completely randomly.

Pair Corralation between Bitcoin and EuroSite Power

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.91 times more return on investment than EuroSite Power. However, Bitcoin is 1.1 times less risky than EuroSite Power. It trades about 0.08 of its potential returns per unit of risk. EuroSite Power is currently generating about 0.05 per unit of risk. If you would invest  2,267,620  in Bitcoin on October 10, 2024 and sell it today you would earn a total of  7,432,717  from holding Bitcoin or generate 327.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	60.0%
Values	Daily Returns

Bitcoin  vs.  EuroSite Power

Bitcoin

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 17 (%) 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.

EuroSite Power

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EuroSite Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, EuroSite Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and EuroSite Power

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

The idea behind Bitcoin and EuroSite Power 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.