Correlation Between Grayscale Bitcoin and ARK 21Shares

Can any of the company-specific risk be diversified away by investing in both Grayscale Bitcoin and ARK 21Shares 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 Grayscale Bitcoin and ARK 21Shares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Grayscale Bitcoin Mini and ARK 21Shares Active, you can compare the effects of market volatilities on Grayscale Bitcoin and ARK 21Shares 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 Grayscale Bitcoin with a short position of ARK 21Shares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and ARK 21Shares.

Diversification Opportunities for Grayscale Bitcoin and ARK 21Shares

1.0

Correlation Coefficient

Grayscale Bitcoin  ARK 21Shares

No risk reduction

The 3 months correlation between Grayscale and ARK is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and ARK 21Shares Active in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK 21Shares Active and Grayscale 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 Grayscale Bitcoin Mini are associated (or correlated) with ARK 21Shares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK 21Shares Active has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and ARK 21Shares go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and ARK 21Shares

Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to generate 1.01 times more return on investment than ARK 21Shares. However, Grayscale Bitcoin is 1.01 times more volatile than ARK 21Shares Active. It trades about 0.26 of its potential returns per unit of risk. ARK 21Shares Active is currently generating about 0.25 per unit of risk. If you would invest  2,575  in Grayscale Bitcoin Mini on September 1, 2024 and sell it today you would earn a total of  1,734  from holding Grayscale Bitcoin Mini or generate 67.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Grayscale Bitcoin Mini  vs.  ARK 21Shares Active

Grayscale Bitcoin Mini

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Mini are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARK 21Shares Active

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ARK 21Shares Active are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward-looking signals, ARK 21Shares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grayscale Bitcoin and ARK 21Shares

The main advantage of trading using opposite Grayscale Bitcoin and ARK 21Shares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grayscale Bitcoin position performs unexpectedly, ARK 21Shares 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 ARK 21Shares will offset losses from the drop in ARK 21Shares' long position.

The idea behind Grayscale Bitcoin Mini and ARK 21Shares Active 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.