Correlation Between Bitcoin and Otto Energy

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

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

Diversification Opportunities for Bitcoin and Otto Energy

-0.48

Correlation Coefficient

Bitcoin  Otto Energy

Very good diversification

The 3 months correlation between Bitcoin and Otto is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Otto Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otto 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 Otto Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otto Energy has no effect on the direction of Bitcoin i.e., Bitcoin and Otto Energy go up and down completely randomly.

Pair Corralation between Bitcoin and Otto Energy

Assuming the 90 days trading horizon Bitcoin is expected to generate 2.84 times less return on investment than Otto Energy. But when comparing it to its historical volatility, Bitcoin is 2.55 times less risky than Otto Energy. It trades about 0.1 of its potential returns per unit of risk. Otto Energy is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1.00  in Otto Energy on October 25, 2024 and sell it today you would earn a total of  0.10  from holding Otto Energy or generate 10.0% return on investment over 90 days.

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

Bitcoin  vs.  Otto 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.

Otto Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Otto Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Otto Energy is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bitcoin and Otto Energy

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

The idea behind Bitcoin and Otto 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.