Correlation Between Grayscale Bitcoin and SPDR Galaxy

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

Diversification Opportunities for Grayscale Bitcoin and SPDR Galaxy

0.76

Correlation Coefficient

Grayscale Bitcoin  SPDR Galaxy

Poor diversification

The 3 months correlation between Grayscale and SPDR is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and SPDR Galaxy Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Galaxy Digital 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 SPDR Galaxy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Galaxy Digital has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and SPDR Galaxy go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and SPDR Galaxy

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 0.77 times more return on investment than SPDR Galaxy. However, Grayscale Bitcoin Trust is 1.29 times less risky than SPDR Galaxy. It trades about -0.03 of its potential returns per unit of risk. SPDR Galaxy Digital is currently generating about -0.07 per unit of risk. If you would invest  7,576  in Grayscale Bitcoin Trust on December 26, 2024 and sell it today you would lose (604.00) from holding Grayscale Bitcoin Trust or give up 7.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  SPDR Galaxy Digital

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 rather sound basic indicators, Grayscale Bitcoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

SPDR Galaxy Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPDR Galaxy Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the ETF investors.

Pair Trading with Grayscale Bitcoin and SPDR Galaxy

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

The idea behind Grayscale Bitcoin Trust and SPDR Galaxy Digital 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.