Correlation Between Bitcoin and IShares

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

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

Diversification Opportunities for Bitcoin and IShares

-0.55

Correlation Coefficient

Bitcoin  IShares

Excellent diversification

The 3 months correlation between Bitcoin and IShares is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Bitcoin i.e., Bitcoin and IShares go up and down completely randomly.

Pair Corralation between Bitcoin and IShares

If you would invest  9,190,389  in Bitcoin on October 26, 2024 and sell it today you would earn a total of  1,223,611  from holding Bitcoin or generate 13.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.33%
Values	Daily Returns

Bitcoin  vs.  IShares

Bitcoin

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 15 (%) 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.

IShares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IShares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bitcoin and IShares

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

The idea behind Bitcoin and IShares 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.