Correlation Between Grayscale Bitcoin and IShares

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

Diversification Opportunities for Grayscale Bitcoin and IShares

0.91

Correlation Coefficient

Grayscale Bitcoin  IShares

Almost no diversification

The 3 months correlation between Grayscale and IShares is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and IShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IShares 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 IShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IShares has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and IShares go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and IShares

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 25.49 times more return on investment than IShares. However, Grayscale Bitcoin is 25.49 times more volatile than IShares. It trades about 0.24 of its potential returns per unit of risk. IShares is currently generating about -0.08 per unit of risk. If you would invest  7,277  in Grayscale Bitcoin Trust on September 18, 2024 and sell it today you would earn a total of  1,125  from holding Grayscale Bitcoin Trust or generate 15.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	55.0%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  IShares

Grayscale Bitcoin Trust

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

IShares

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days IShares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, IShares is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Grayscale Bitcoin and IShares

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

The idea behind Grayscale Bitcoin Trust and IShares 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.