Correlation Between Grayscale Bitcoin and Simplify Equity

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

Diversification Opportunities for Grayscale Bitcoin and Simplify Equity

0.68

Correlation Coefficient

Grayscale Bitcoin  Simplify Equity

Poor diversification

The 3 months correlation between Grayscale and Simplify is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and Simplify Equity PLUS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simplify Equity PLUS 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 Simplify Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simplify Equity PLUS has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Simplify Equity go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and Simplify Equity

Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to generate 2.9 times more return on investment than Simplify Equity. However, Grayscale Bitcoin is 2.9 times more volatile than Simplify Equity PLUS. It trades about 0.16 of its potential returns per unit of risk. Simplify Equity PLUS is currently generating about 0.15 per unit of risk. If you would invest  4,267  in Grayscale Bitcoin Mini on October 20, 2024 and sell it today you would earn a total of  376.00  from holding Grayscale Bitcoin Mini or generate 8.81% return on investment over 90 days.

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

Grayscale Bitcoin Mini  vs.  Simplify Equity PLUS

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.

Simplify Equity PLUS

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Simplify Equity PLUS are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental drivers, Simplify Equity may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Grayscale Bitcoin and Simplify Equity

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

The idea behind Grayscale Bitcoin Mini and Simplify Equity PLUS 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.