Correlation Between Bitcoin and Fidelity

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

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

Diversification Opportunities for Bitcoin and Fidelity

0.05

Correlation Coefficient

Bitcoin  Fidelity

Significant diversification

The 3 months correlation between Bitcoin and Fidelity is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Fidelity Low Volatility in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Low Volatility 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 Fidelity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Low Volatility has no effect on the direction of Bitcoin i.e., Bitcoin and Fidelity go up and down completely randomly.

Pair Corralation between Bitcoin and Fidelity

Assuming the 90 days trading horizon Bitcoin is expected to generate 3.46 times more return on investment than Fidelity. However, Bitcoin is 3.46 times more volatile than Fidelity Low Volatility. It trades about -0.02 of its potential returns per unit of risk. Fidelity Low Volatility is currently generating about -0.44 per unit of risk. If you would invest  9,665,788  in Bitcoin on October 10, 2024 and sell it today you would lose (164,794) from holding Bitcoin or give up 1.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Bitcoin  vs.  Fidelity Low Volatility

Bitcoin

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 16 (%) 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.

Fidelity Low Volatility

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Low Volatility has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Fidelity is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bitcoin and Fidelity

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

The idea behind Bitcoin and Fidelity Low Volatility 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.

Check out your portfolio center.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.