Correlation Between Bitcoin and Xtrackers MSCI

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

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

Diversification Opportunities for Bitcoin and Xtrackers MSCI

0.82

Correlation Coefficient

Bitcoin  Xtrackers MSCI

Very poor diversification

The 3 months correlation between Bitcoin and Xtrackers is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Xtrackers MSCI USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xtrackers MSCI USA 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 Xtrackers MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xtrackers MSCI USA has no effect on the direction of Bitcoin i.e., Bitcoin and Xtrackers MSCI go up and down completely randomly.

Pair Corralation between Bitcoin and Xtrackers MSCI

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.79 times more return on investment than Xtrackers MSCI. However, Bitcoin is 1.79 times more volatile than Xtrackers MSCI USA. It trades about 0.1 of its potential returns per unit of risk. Xtrackers MSCI USA is currently generating about 0.1 per unit of risk. If you would invest  9,935,606  in Bitcoin on October 25, 2024 and sell it today you would earn a total of  424,294  from holding Bitcoin or generate 4.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	90.48%
Values	Daily Returns

Bitcoin  vs.  Xtrackers MSCI USA

Bitcoin

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 17 (%) 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.

Xtrackers MSCI USA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xtrackers MSCI USA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Xtrackers MSCI may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Bitcoin and Xtrackers MSCI

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

The idea behind Bitcoin and Xtrackers MSCI USA 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.