Correlation Between Grayscale Bitcoin and BTCI

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

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

Diversification Opportunities for Grayscale Bitcoin and BTCI

0.63

Correlation Coefficient

Grayscale Bitcoin  BTCI

Poor diversification

The 3 months correlation between Grayscale and BTCI is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and BTCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTCI and Grayscale 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 Grayscale Bitcoin 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 Bitcoin i.e., Grayscale Bitcoin and BTCI go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and BTCI

Given the investment horizon of 90 days Grayscale Bitcoin is expected to generate 1.44 times less return on investment than BTCI. In addition to that, Grayscale Bitcoin is 1.33 times more volatile than BTCI. It trades about 0.11 of its total potential returns per unit of risk. BTCI is currently generating about 0.2 per unit of volatility. If you would invest  4,607  in BTCI on October 7, 2024 and sell it today you would earn a total of  1,598  from holding BTCI or generate 34.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	43.65%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  BTCI

Grayscale Bitcoin Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

BTCI

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BTCI are ranked lower than 16 (%) 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 Bitcoin and BTCI

The main advantage of trading using opposite Grayscale Bitcoin and BTCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grayscale Bitcoin 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 Bitcoin 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.