Correlation Between Grayscale Bitcoin and First Trust

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

Diversification Opportunities for Grayscale Bitcoin and First Trust

0.57

Correlation Coefficient

Grayscale Bitcoin  First Trust

Very weak diversification

The 3 months correlation between Grayscale and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and First Trust SkyBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SkyBridge 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust SkyBridge has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and First Trust go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and First Trust

Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to generate 0.7 times more return on investment than First Trust. However, Grayscale Bitcoin Mini is 1.42 times less risky than First Trust. It trades about -0.05 of its potential returns per unit of risk. First Trust SkyBridge is currently generating about -0.13 per unit of risk. If you would invest  4,309  in Grayscale Bitcoin Mini on November 28, 2024 and sell it today you would lose (405.00) from holding Grayscale Bitcoin Mini or give up 9.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Grayscale Bitcoin Mini  vs.  First Trust SkyBridge

Grayscale Bitcoin Mini

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Bitcoin Mini has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

First Trust SkyBridge

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Trust SkyBridge has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with Grayscale Bitcoin and First Trust

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

The idea behind Grayscale Bitcoin Mini and First Trust SkyBridge 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.