Correlation Between Grayscale Bitcoin and First Trust

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

Diversification Opportunities for Grayscale Bitcoin and First Trust

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Grayscale and First is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and First Trust go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and First Trust

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 1.65 times more return on investment than First Trust. However, Grayscale Bitcoin is 1.65 times more volatile than First Trust Nasdaq. It trades about 0.05 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.06 per unit of risk. If you would invest  7,633  in Grayscale Bitcoin Trust on October 8, 2024 and sell it today you would earn a total of  169.00  from holding Grayscale Bitcoin Trust or generate 2.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Grayscale Bitcoin Trust  vs.  First Trust Nasdaq

 Performance 
       Timeline  
Grayscale Bitcoin Trust 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 17 (%) 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.
First Trust Nasdaq 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days First Trust Nasdaq has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, First Trust is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Grayscale Bitcoin and First Trust Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Grayscale Bitcoin and First Trust

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

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