Correlation Between Purpose Bitcoin and Bitcoin ETF

Can any of the company-specific risk be diversified away by investing in both Purpose Bitcoin and Bitcoin ETF 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 Purpose Bitcoin and Bitcoin ETF into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Purpose Bitcoin CAD and Bitcoin ETF CAD, you can compare the effects of market volatilities on Purpose Bitcoin and Bitcoin ETF 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 Purpose Bitcoin with a short position of Bitcoin ETF. Check out your portfolio center. Please also check ongoing floating volatility patterns of Purpose Bitcoin and Bitcoin ETF.

Diversification Opportunities for Purpose Bitcoin and Bitcoin ETF

1.0

Correlation Coefficient

Purpose Bitcoin  Bitcoin ETF

No risk reduction

The 3 months correlation between Purpose and Bitcoin is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Purpose Bitcoin CAD and Bitcoin ETF CAD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin ETF CAD and Purpose 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 Purpose Bitcoin CAD are associated (or correlated) with Bitcoin ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin ETF CAD has no effect on the direction of Purpose Bitcoin i.e., Purpose Bitcoin and Bitcoin ETF go up and down completely randomly.

Pair Corralation between Purpose Bitcoin and Bitcoin ETF

Assuming the 90 days trading horizon Purpose Bitcoin is expected to generate 1.07 times less return on investment than Bitcoin ETF. In addition to that, Purpose Bitcoin is 1.01 times more volatile than Bitcoin ETF CAD. It trades about 0.26 of its total potential returns per unit of risk. Bitcoin ETF CAD is currently generating about 0.28 per unit of volatility. If you would invest  2,912  in Bitcoin ETF CAD on September 13, 2024 and sell it today you would earn a total of  2,227  from holding Bitcoin ETF CAD or generate 76.48% return on investment over 90 days.

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

Purpose Bitcoin CAD  vs.  Bitcoin ETF CAD

Purpose Bitcoin CAD

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Purpose Bitcoin CAD are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Purpose Bitcoin displayed solid returns over the last few months and may actually be approaching a breakup point.

Bitcoin ETF CAD

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin ETF CAD are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bitcoin ETF displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Purpose Bitcoin and Bitcoin ETF

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

The idea behind Purpose Bitcoin CAD and Bitcoin ETF CAD 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.