Correlation Between Grayscale Bitcoin and IndexIQ

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

Diversification Opportunities for Grayscale Bitcoin and IndexIQ

-0.44

Correlation Coefficient

Grayscale Bitcoin  IndexIQ

Very good diversification

The 3 months correlation between Grayscale and IndexIQ is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and IndexIQ in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IndexIQ 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 IndexIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IndexIQ has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and IndexIQ go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and IndexIQ

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 4.27 times more return on investment than IndexIQ. However, Grayscale Bitcoin is 4.27 times more volatile than IndexIQ. It trades about 0.23 of its potential returns per unit of risk. IndexIQ is currently generating about -0.07 per unit of risk. If you would invest  4,749  in Grayscale Bitcoin Trust on October 10, 2024 and sell it today you would earn a total of  2,896  from holding Grayscale Bitcoin Trust or generate 60.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	52.46%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  IndexIQ

Grayscale Bitcoin Trust

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 18 (%) 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.

IndexIQ

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IndexIQ has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, IndexIQ is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Grayscale Bitcoin and IndexIQ

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

The idea behind Grayscale Bitcoin Trust and IndexIQ 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.