Correlation Between Bitcoin and Solana

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

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

Diversification Opportunities for Bitcoin and Solana

0.49

Correlation Coefficient

Bitcoin  Solana

Very weak diversification

The 3 months correlation between Bitcoin and Solana is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Solana in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solana 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 Solana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solana has no effect on the direction of Bitcoin i.e., Bitcoin and Solana go up and down completely randomly.

Pair Corralation between Bitcoin and Solana

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.45 times more return on investment than Solana. However, Bitcoin is 2.24 times less risky than Solana. It trades about 0.03 of its potential returns per unit of risk. Solana is currently generating about -0.03 per unit of risk. If you would invest  9,437,992  in Bitcoin on November 19, 2024 and sell it today you would earn a total of  321,629  from holding Bitcoin or generate 3.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bitcoin  vs.  Solana

Bitcoin

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Bitcoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Solana

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solana has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Solana shareholders.

Pair Trading with Bitcoin and Solana

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

The idea behind Bitcoin and Solana 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.