Correlation Between IShares Bitcoin and First Trust

Can any of the company-specific risk be diversified away by investing in both IShares Bitcoin and First Trust 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 IShares Bitcoin and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares Bitcoin Trust and First Trust Dow, you can compare the effects of market volatilities on IShares Bitcoin and First Trust 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 IShares Bitcoin with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares Bitcoin and First Trust.

Diversification Opportunities for IShares Bitcoin and First Trust

0.95

Correlation Coefficient

IShares Bitcoin  First Trust

Almost no diversification

The 3 months correlation between IShares and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding iShares Bitcoin Trust and First Trust Dow in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Dow and IShares 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 iShares Bitcoin Trust are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Dow has no effect on the direction of IShares Bitcoin i.e., IShares Bitcoin and First Trust go up and down completely randomly.

Pair Corralation between IShares Bitcoin and First Trust

Given the investment horizon of 90 days iShares Bitcoin Trust is expected to generate 3.01 times more return on investment than First Trust. However, IShares Bitcoin is 3.01 times more volatile than First Trust Dow. It trades about 0.18 of its potential returns per unit of risk. First Trust Dow is currently generating about 0.47 per unit of risk. If you would invest  5,213  in iShares Bitcoin Trust on September 16, 2024 and sell it today you would earn a total of  578.00  from holding iShares Bitcoin Trust or generate 11.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

iShares Bitcoin Trust  vs.  First Trust Dow

iShares Bitcoin Trust

Risk-Adjusted Performance

22 of 100

Solid

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

First Trust Dow

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Trust Dow are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, First Trust displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares Bitcoin and First Trust

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

The idea behind iShares Bitcoin Trust and First Trust Dow 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.