Correlation Between Grayscale Bitcoin and ProShares Trust

Can any of the company-specific risk be diversified away by investing in both Grayscale Bitcoin and ProShares Trust 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 ProShares Trust 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 ProShares Trust, you can compare the effects of market volatilities on Grayscale Bitcoin and ProShares Trust 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 ProShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and ProShares Trust.

Diversification Opportunities for Grayscale Bitcoin and ProShares Trust

0.85

Correlation Coefficient

Grayscale Bitcoin  ProShares Trust

Very poor diversification

The 3 months correlation between Grayscale and ProShares is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and ProShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Trust 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 ProShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Trust has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and ProShares Trust go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and ProShares Trust

Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to under-perform the ProShares Trust. But the etf apears to be less risky and, when comparing its historical volatility, Grayscale Bitcoin Mini is 1.97 times less risky than ProShares Trust. The etf trades about -0.01 of its potential returns per unit of risk. The ProShares Trust is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,584  in ProShares Trust on October 7, 2024 and sell it today you would earn a total of  1,894  from holding ProShares Trust or generate 52.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	38.91%
Values	Daily Returns

Grayscale Bitcoin Mini  vs.  ProShares Trust

Grayscale Bitcoin Mini

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Mini are ranked lower than 16 (%) 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.

ProShares Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ProShares Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent basic indicators, ProShares Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grayscale Bitcoin and ProShares Trust

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

The idea behind Grayscale Bitcoin Mini and ProShares Trust 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.