Correlation Between Bitcoin and Ultrashort China

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

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

Diversification Opportunities for Bitcoin and Ultrashort China

0.54

Correlation Coefficient

Bitcoin  Ultrashort China

Very weak diversification

The 3 months correlation between Bitcoin and ULTRASHORT is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Ultrashort China Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ultrashort China Profund 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 Ultrashort China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ultrashort China Profund has no effect on the direction of Bitcoin i.e., Bitcoin and Ultrashort China go up and down completely randomly.

Pair Corralation between Bitcoin and Ultrashort China

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.66 times more return on investment than Ultrashort China. However, Bitcoin is 1.52 times less risky than Ultrashort China. It trades about 0.21 of its potential returns per unit of risk. Ultrashort China Profund is currently generating about 0.02 per unit of risk. If you would invest  9,568,019  in Bitcoin on October 26, 2024 and sell it today you would earn a total of  845,981  from holding Bitcoin or generate 8.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	85.71%
Values	Daily Returns

Bitcoin  vs.  Ultrashort China Profund

Bitcoin

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 15 (%) 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.

Ultrashort China Profund

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ultrashort China Profund are ranked lower than 6 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Ultrashort China showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and Ultrashort China

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

The idea behind Bitcoin and Ultrashort China Profund 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.