Correlation Between CHR and Bitcoin
Can any of the company-specific risk be diversified away by investing in both CHR and Bitcoin 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 CHR and Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHR and Bitcoin, you can compare the effects of market volatilities on CHR and Bitcoin 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 CHR with a short position of Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHR and Bitcoin.
Diversification Opportunities for CHR and Bitcoin
Poor diversification
The 3 months correlation between CHR and Bitcoin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding CHR and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin and CHR 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 CHR are associated (or correlated) with Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of CHR i.e., CHR and Bitcoin go up and down completely randomly.
Pair Corralation between CHR and Bitcoin
Assuming the 90 days trading horizon CHR is expected to under-perform the Bitcoin. In addition to that, CHR is 2.71 times more volatile than Bitcoin. It trades about -0.17 of its total potential returns per unit of risk. Bitcoin is currently generating about -0.07 per unit of volatility. If you would invest 9,339,198 in Bitcoin on December 30, 2024 and sell it today you would lose (1,096,436) from holding Bitcoin or give up 11.74% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
CHR vs. Bitcoin
Performance |
Timeline |
CHR |
Bitcoin |
CHR and Bitcoin Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CHR and Bitcoin
The main advantage of trading using opposite CHR and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHR position performs unexpectedly, Bitcoin 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 will offset losses from the drop in Bitcoin's long position.The idea behind CHR and Bitcoin 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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