Correlation Between SPDR Galaxy and Bitwise Crypto

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

By analyzing existing cross correlation between SPDR Galaxy Digital and Bitwise Crypto Industry, you can compare the effects of market volatilities on SPDR Galaxy and Bitwise Crypto 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 SPDR Galaxy with a short position of Bitwise Crypto. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPDR Galaxy and Bitwise Crypto.

Diversification Opportunities for SPDR Galaxy and Bitwise Crypto

0.98

Correlation Coefficient

SPDR Galaxy  Bitwise Crypto

Almost no diversification

The 3 months correlation between SPDR and Bitwise is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding SPDR Galaxy Digital and Bitwise Crypto Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitwise Crypto Industry and SPDR Galaxy 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 SPDR Galaxy Digital are associated (or correlated) with Bitwise Crypto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitwise Crypto Industry has no effect on the direction of SPDR Galaxy i.e., SPDR Galaxy and Bitwise Crypto go up and down completely randomly.

Pair Corralation between SPDR Galaxy and Bitwise Crypto

Given the investment horizon of 90 days SPDR Galaxy is expected to generate 1.45 times less return on investment than Bitwise Crypto. But when comparing it to its historical volatility, SPDR Galaxy Digital is 1.3 times less risky than Bitwise Crypto. It trades about 0.09 of its potential returns per unit of risk. Bitwise Crypto Industry is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,557  in Bitwise Crypto Industry on October 20, 2024 and sell it today you would earn a total of  407.00  from holding Bitwise Crypto Industry or generate 26.14% return on investment over 90 days.

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

SPDR Galaxy Digital  vs.  Bitwise Crypto Industry

SPDR Galaxy Digital

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in SPDR Galaxy Digital are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, SPDR Galaxy displayed solid returns over the last few months and may actually be approaching a breakup point.

Bitwise Crypto Industry

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise Crypto Industry are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Bitwise Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SPDR Galaxy and Bitwise Crypto

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

The idea behind SPDR Galaxy Digital and Bitwise Crypto Industry 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.