Correlation Between Grayscale Bitcoin and Tidal ETF

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

Diversification Opportunities for Grayscale Bitcoin and Tidal ETF

-0.88

Correlation Coefficient

Grayscale Bitcoin  Tidal ETF

Pay attention - limited upside

The 3 months correlation between Grayscale and Tidal is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and Tidal ETF Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tidal ETF Trust 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 Tidal ETF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tidal ETF Trust has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Tidal ETF go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and Tidal ETF

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 4.91 times more return on investment than Tidal ETF. However, Grayscale Bitcoin is 4.91 times more volatile than Tidal ETF Trust. It trades about 0.25 of its potential returns per unit of risk. Tidal ETF Trust is currently generating about -0.46 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  1,196  from holding Grayscale Bitcoin Trust or generate 16.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  Tidal ETF Trust

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.

Tidal ETF Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tidal ETF Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the ETF investors.

Pair Trading with Grayscale Bitcoin and Tidal ETF

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

The idea behind Grayscale Bitcoin Trust and Tidal ETF Trust 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.