Correlation Between Grayscale Ethereum and BTCI

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

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

Diversification Opportunities for Grayscale Ethereum and BTCI

0.56

Correlation Coefficient

Grayscale Ethereum  BTCI

Very weak diversification

The 3 months correlation between Grayscale and BTCI is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Ethereum Trust and BTCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTCI and Grayscale Ethereum 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 Ethereum Trust are associated (or correlated) with BTCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTCI has no effect on the direction of Grayscale Ethereum i.e., Grayscale Ethereum and BTCI go up and down completely randomly.

Pair Corralation between Grayscale Ethereum and BTCI

Given the investment horizon of 90 days Grayscale Ethereum Trust is expected to under-perform the BTCI. In addition to that, Grayscale Ethereum is 1.35 times more volatile than BTCI. It trades about -0.01 of its total potential returns per unit of risk. BTCI is currently generating about 0.12 per unit of volatility. If you would invest  6,065  in BTCI on October 9, 2024 and sell it today you would earn a total of  362.00  from holding BTCI or generate 5.97% return on investment over 90 days.

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

Grayscale Ethereum Trust  vs.  BTCI

Grayscale Ethereum Trust

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Ethereum Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, Grayscale Ethereum exhibited solid returns over the last few months and may actually be approaching a breakup point.

BTCI

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTCI are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental indicators, BTCI demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grayscale Ethereum and BTCI

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

The idea behind Grayscale Ethereum Trust and BTCI 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..