Correlation Between Grayscale Bitcoin and SPDR Portfolio

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

Diversification Opportunities for Grayscale Bitcoin and SPDR Portfolio

-0.37

Correlation Coefficient

Grayscale Bitcoin  SPDR Portfolio

Very good diversification

The 3 months correlation between Grayscale and SPDR is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and SPDR Portfolio Corporate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Portfolio Corporate 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 Portfolio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Portfolio Corporate has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and SPDR Portfolio go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and SPDR Portfolio

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 9.42 times more return on investment than SPDR Portfolio. However, Grayscale Bitcoin is 9.42 times more volatile than SPDR Portfolio Corporate. It trades about 0.21 of its potential returns per unit of risk. SPDR Portfolio Corporate is currently generating about -0.08 per unit of risk. If you would invest  5,044  in Grayscale Bitcoin Trust on October 5, 2024 and sell it today you would earn a total of  2,677  from holding Grayscale Bitcoin Trust or generate 53.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  SPDR Portfolio Corporate

Grayscale Bitcoin Trust

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 16 (%) 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.

SPDR Portfolio Corporate

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Grayscale Bitcoin and SPDR Portfolio

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

The idea behind Grayscale Bitcoin Trust and SPDR Portfolio Corporate 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.