Correlation Between ProShares Trust and Grayscale Bitcoin

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

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

Diversification Opportunities for ProShares Trust and Grayscale Bitcoin

-0.97

Correlation Coefficient

ProShares Trust  Grayscale Bitcoin

Pay attention - limited upside

The 3 months correlation between ProShares and Grayscale is -0.97. Overlapping area represents the amount of risk that can be diversified away by holding ProShares Trust and Grayscale Bitcoin Mini in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Bitcoin Mini and ProShares Trust 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 ProShares Trust are associated (or correlated) with Grayscale Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Bitcoin Mini has no effect on the direction of ProShares Trust i.e., ProShares Trust and Grayscale Bitcoin go up and down completely randomly.

Pair Corralation between ProShares Trust and Grayscale Bitcoin

Given the investment horizon of 90 days ProShares Trust is expected to under-perform the Grayscale Bitcoin. In addition to that, ProShares Trust is 2.49 times more volatile than Grayscale Bitcoin Mini. It trades about -0.17 of its total potential returns per unit of risk. Grayscale Bitcoin Mini is currently generating about 0.25 per unit of volatility. If you would invest  2,575  in Grayscale Bitcoin Mini on September 3, 2024 and sell it today you would earn a total of  1,734  from holding Grayscale Bitcoin Mini or generate 67.34% return on investment over 90 days.

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

ProShares Trust  vs.  Grayscale Bitcoin Mini

ProShares Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProShares Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Etf's technical indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the fund shareholders.

Grayscale Bitcoin Mini

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Mini are ranked lower than 20 (%) 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.

Pair Trading with ProShares Trust and Grayscale Bitcoin

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

The idea behind ProShares Trust and Grayscale Bitcoin Mini 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.