Correlation Between Grayscale Bitcoin and Wisdom Tree

Can any of the company-specific risk be diversified away by investing in both Grayscale Bitcoin and Wisdom Tree 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 Wisdom Tree 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 Wisdom Tree Bitcoin, you can compare the effects of market volatilities on Grayscale Bitcoin and Wisdom Tree 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 Wisdom Tree. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and Wisdom Tree.

Diversification Opportunities for Grayscale Bitcoin and Wisdom Tree

1.0

Correlation Coefficient

Grayscale Bitcoin  Wisdom Tree

No risk reduction

The 3 months correlation between Grayscale and Wisdom is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and Wisdom Tree Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wisdom Tree Bitcoin 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 Wisdom Tree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wisdom Tree Bitcoin has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Wisdom Tree go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and Wisdom Tree

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to under-perform the Wisdom Tree. But the etf apears to be less risky and, when comparing its historical volatility, Grayscale Bitcoin Trust is 1.01 times less risky than Wisdom Tree. The etf trades about -0.05 of its potential returns per unit of risk. The Wisdom Tree Bitcoin is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  9,954  in Wisdom Tree Bitcoin on December 30, 2024 and sell it today you would lose (1,092) from holding Wisdom Tree Bitcoin or give up 10.97% of portfolio value over 90 days.

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

Grayscale Bitcoin Trust  vs.  Wisdom Tree Bitcoin

Grayscale Bitcoin Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grayscale Bitcoin Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the fund shareholders.

Wisdom Tree Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wisdom Tree Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the fund sophisticated investors.

Pair Trading with Grayscale Bitcoin and Wisdom Tree

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

The idea behind Grayscale Bitcoin Trust and Wisdom Tree 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.