Correlation Between Bitcoin and Makita

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

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

Diversification Opportunities for Bitcoin and Makita

-0.63

Correlation Coefficient

Bitcoin  Makita

Excellent diversification

The 3 months correlation between Bitcoin and Makita is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Makita in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Makita 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 Makita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Makita has no effect on the direction of Bitcoin i.e., Bitcoin and Makita go up and down completely randomly.

Pair Corralation between Bitcoin and Makita

Assuming the 90 days trading horizon Bitcoin is expected to under-perform the Makita. In addition to that, Bitcoin is 1.01 times more volatile than Makita. It trades about -0.07 of its total potential returns per unit of risk. Makita is currently generating about 0.11 per unit of volatility. If you would invest  2,862  in Makita on December 21, 2024 and sell it today you would earn a total of  424.00  from holding Makita or generate 14.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Bitcoin  vs.  Makita

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 latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Bitcoin shareholders.

Makita

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Makita are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Makita reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and Makita

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

The idea behind Bitcoin and Makita 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.