Correlation Between Bitcoin and Total Return

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

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

Diversification Opportunities for Bitcoin and Total Return

0.0

Correlation Coefficient

Bitcoin  Total Return

Pay attention - limited upside

The 3 months correlation between Bitcoin and Total is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Total Return Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Total Return Strategy 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 Total Return. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Total Return Strategy has no effect on the direction of Bitcoin i.e., Bitcoin and Total Return go up and down completely randomly.

Pair Corralation between Bitcoin and Total Return

If you would invest  6,251,742  in Bitcoin on October 10, 2024 and sell it today you would earn a total of  3,249,252  from holding Bitcoin or generate 51.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bitcoin  vs.  Total Return Strategy

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.

Total Return Strategy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Total Return Strategy has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, Total Return 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 Total Return

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

The idea behind Bitcoin and Total Return Strategy 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.