Correlation Between Bitcoin and BMO BBB

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

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

Diversification Opportunities for Bitcoin and BMO BBB

0.49

Correlation Coefficient

Bitcoin  BMO BBB

Very weak diversification

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

Pair Corralation between Bitcoin and BMO BBB

Assuming the 90 days trading horizon Bitcoin is expected to generate 13.05 times more return on investment than BMO BBB. However, Bitcoin is 13.05 times more volatile than BMO BBB Corporate. It trades about 0.22 of its potential returns per unit of risk. BMO BBB Corporate is currently generating about 0.09 per unit of risk. If you would invest  6,701,472  in Bitcoin on October 25, 2024 and sell it today you would earn a total of  3,658,428  from holding Bitcoin or generate 54.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Bitcoin  vs.  BMO BBB Corporate

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.

BMO BBB Corporate

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BMO BBB Corporate are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, BMO BBB is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bitcoin and BMO BBB

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

The idea behind Bitcoin and BMO BBB Corporate 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.