Correlation Between Bitcoin and ETF Series

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

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

Diversification Opportunities for Bitcoin and ETF Series

0.65

Correlation Coefficient

Bitcoin  ETF Series

Poor diversification

The 3 months correlation between Bitcoin and ETF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and ETF Series Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ETF Series Solutions 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 ETF Series. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ETF Series Solutions has no effect on the direction of Bitcoin i.e., Bitcoin and ETF Series go up and down completely randomly.

Pair Corralation between Bitcoin and ETF Series

Assuming the 90 days trading horizon Bitcoin is expected to under-perform the ETF Series. In addition to that, Bitcoin is 1.61 times more volatile than ETF Series Solutions. It trades about -0.09 of its total potential returns per unit of risk. ETF Series Solutions is currently generating about 0.05 per unit of volatility. If you would invest  1,985  in ETF Series Solutions on December 19, 2024 and sell it today you would earn a total of  72.00  from holding ETF Series Solutions or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	84.13%
Values	Daily Returns

Bitcoin  vs.  ETF Series Solutions

Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for Bitcoin shareholders.

ETF Series Solutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ETF Series Solutions are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, ETF Series is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Bitcoin and ETF Series

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

The idea behind Bitcoin and ETF Series Solutions 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.