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 Indxx, 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

-0.38

Correlation Coefficient

Grayscale Bitcoin  First Trust

Very good diversification

The 3 months correlation between Grayscale and First is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and First Trust Indxx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Indxx 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 Indxx 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 under-perform the First Trust. In addition to that, Grayscale Bitcoin is 3.47 times more volatile than First Trust Indxx. It trades about -0.03 of its total potential returns per unit of risk. First Trust Indxx is currently generating about 0.13 per unit of volatility. If you would invest  4,658  in First Trust Indxx on December 28, 2024 and sell it today you would earn a total of  310.00  from holding First Trust Indxx or generate 6.66% return on investment over 90 days.

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

Grayscale Bitcoin Mini  vs.  First Trust Indxx

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 rather sound basic indicators, Grayscale Bitcoin is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Trust Indxx

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Indxx are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, First Trust may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 Indxx 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.