Correlation Between Bitcoin and New Zealand

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

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

Diversification Opportunities for Bitcoin and New Zealand

0.45

Correlation Coefficient

Bitcoin  New Zealand

Very weak diversification

The 3 months correlation between Bitcoin and New is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and New Zealand Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Zealand Energy 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 New Zealand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Zealand Energy has no effect on the direction of Bitcoin i.e., Bitcoin and New Zealand go up and down completely randomly.

Pair Corralation between Bitcoin and New Zealand

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.77 times less return on investment than New Zealand. But when comparing it to its historical volatility, Bitcoin is 3.31 times less risky than New Zealand. It trades about 0.22 of its potential returns per unit of risk. New Zealand Energy is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  49.00  in New Zealand Energy on October 25, 2024 and sell it today you would earn a total of  33.00  from holding New Zealand Energy or generate 67.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.83%
Values	Daily Returns

Bitcoin  vs.  New Zealand Energy

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.

New Zealand Energy

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in New Zealand Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, New Zealand showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and New Zealand

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

The idea behind Bitcoin and New Zealand Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..