Correlation Between Bitcoin and VanEck Vectors

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

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

Diversification Opportunities for Bitcoin and VanEck Vectors

-0.09

Correlation Coefficient

Bitcoin  VanEck Vectors

Good diversification

The 3 months correlation between Bitcoin and VanEck is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and VanEck Vectors ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Vectors ETF 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 VanEck Vectors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Vectors ETF has no effect on the direction of Bitcoin i.e., Bitcoin and VanEck Vectors go up and down completely randomly.

Pair Corralation between Bitcoin and VanEck Vectors

Assuming the 90 days trading horizon Bitcoin is expected to generate 5.79 times more return on investment than VanEck Vectors. However, Bitcoin is 5.79 times more volatile than VanEck Vectors ETF. It trades about 0.08 of its potential returns per unit of risk. VanEck Vectors ETF is currently generating about 0.0 per unit of risk. If you would invest  2,267,620  in Bitcoin on October 10, 2024 and sell it today you would earn a total of  7,432,717  from holding Bitcoin or generate 327.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	60.32%
Values	Daily Returns

Bitcoin  vs.  VanEck Vectors ETF

Bitcoin

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 16 (%) 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.

VanEck Vectors ETF

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in VanEck Vectors ETF are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong technical indicators, VanEck Vectors is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bitcoin and VanEck Vectors

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

The idea behind Bitcoin and VanEck Vectors ETF 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.