Correlation Between Grayscale Bitcoin and ROYALTY

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

Diversification Opportunities for Grayscale Bitcoin and ROYALTY

0.31

Correlation Coefficient

Grayscale Bitcoin  ROYALTY

Weak diversification

The 3 months correlation between Grayscale and ROYALTY is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and ROYALTY PHARMA PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ROYALTY PHARMA PLC 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 ROYALTY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ROYALTY PHARMA PLC has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and ROYALTY go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and ROYALTY

Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to under-perform the ROYALTY. In addition to that, Grayscale Bitcoin is 3.02 times more volatile than ROYALTY PHARMA PLC. It trades about -0.05 of its total potential returns per unit of risk. ROYALTY PHARMA PLC is currently generating about -0.12 per unit of volatility. If you would invest  9,195  in ROYALTY PHARMA PLC on December 24, 2024 and sell it today you would lose (645.00) from holding ROYALTY PHARMA PLC or give up 7.01% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.72%
Values	Daily Returns

Grayscale Bitcoin Mini  vs.  ROYALTY PHARMA PLC

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.

ROYALTY PHARMA PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ROYALTY PHARMA PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for ROYALTY PHARMA PLC investors.

Pair Trading with Grayscale Bitcoin and ROYALTY

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

The idea behind Grayscale Bitcoin Mini and ROYALTY PHARMA PLC 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..