Correlation Between Bitcoin and Consumer Staples

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

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

Diversification Opportunities for Bitcoin and Consumer Staples

-0.39

Correlation Coefficient

Bitcoin  Consumer Staples

Very good diversification

The 3 months correlation between Bitcoin and Consumer is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Consumer Staples Portfolio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consumer Staples Por 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 Consumer Staples. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consumer Staples Por has no effect on the direction of Bitcoin i.e., Bitcoin and Consumer Staples go up and down completely randomly.

Pair Corralation between Bitcoin and Consumer Staples

Assuming the 90 days trading horizon Bitcoin is expected to under-perform the Consumer Staples. In addition to that, Bitcoin is 2.0 times more volatile than Consumer Staples Portfolio. It trades about -0.09 of its total potential returns per unit of risk. Consumer Staples Portfolio is currently generating about -0.1 per unit of volatility. If you would invest  9,354  in Consumer Staples Portfolio on December 22, 2024 and sell it today you would lose (711.00) from holding Consumer Staples Portfolio or give up 7.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.75%
Values	Daily Returns

Bitcoin  vs.  Consumer Staples Portfolio

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 unsteady performance in the last few months, the Crypto's fundamental 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 Bitcoin shareholders.

Consumer Staples Por

Risk-Adjusted Performance

Very Weak

Over the last 90 days Consumer Staples Portfolio has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Bitcoin and Consumer Staples

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

The idea behind Bitcoin and Consumer Staples Portfolio 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.