Correlation Between Bitcoin and IShares Interest

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

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

Diversification Opportunities for Bitcoin and IShares Interest

0.89

Correlation Coefficient

Bitcoin  IShares Interest

Very poor diversification

The 3 months correlation between Bitcoin and IShares is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and iShares Interest Rate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Interest Rate 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 Interest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Interest Rate has no effect on the direction of Bitcoin i.e., Bitcoin and IShares Interest go up and down completely randomly.

Pair Corralation between Bitcoin and IShares Interest

Assuming the 90 days trading horizon Bitcoin is expected to generate 29.69 times more return on investment than IShares Interest. However, Bitcoin is 29.69 times more volatile than iShares Interest Rate. It trades about 0.08 of its potential returns per unit of risk. iShares Interest Rate is currently generating about 0.12 per unit of risk. If you would invest  2,445,050  in Bitcoin on October 10, 2024 and sell it today you would earn a total of  7,255,287  from holding Bitcoin or generate 296.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	58.14%
Values	Daily Returns

Bitcoin  vs.  iShares Interest Rate

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.

iShares Interest Rate

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Interest Rate are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, IShares Interest is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bitcoin and IShares Interest

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

The idea behind Bitcoin and iShares Interest Rate 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.