Correlation Between Grayscale Bitcoin and XBTF

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

Diversification Opportunities for Grayscale Bitcoin and XBTF

0.57

Correlation Coefficient

Grayscale Bitcoin  XBTF

Very weak diversification

The 3 months correlation between Grayscale and XBTF is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and XBTF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XBTF 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 XBTF. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XBTF has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and XBTF go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and XBTF

If you would invest  4,466  in Grayscale Bitcoin Trust on September 5, 2024 and sell it today you would earn a total of  3,129  from holding Grayscale Bitcoin Trust or generate 70.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  XBTF

Grayscale Bitcoin Trust

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

XBTF

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Grayscale Bitcoin and XBTF

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

The idea behind Grayscale Bitcoin Trust and XBTF 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.