Correlation Between IShares SP and 21Shares Bitcoin

Can any of the company-specific risk be diversified away by investing in both IShares SP and 21Shares Bitcoin 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 SP and 21Shares Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between iShares SP 500 and 21Shares Bitcoin ETP, you can compare the effects of market volatilities on IShares SP and 21Shares Bitcoin 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 SP with a short position of 21Shares Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of IShares SP and 21Shares Bitcoin.

Diversification Opportunities for IShares SP and 21Shares Bitcoin

0.86

Correlation Coefficient

IShares SP  21Shares Bitcoin

Very poor diversification

The 3 months correlation between IShares and 21Shares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding iShares SP 500 and 21Shares Bitcoin ETP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21Shares Bitcoin ETP and IShares SP 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 SP 500 are associated (or correlated) with 21Shares Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21Shares Bitcoin ETP has no effect on the direction of IShares SP i.e., IShares SP and 21Shares Bitcoin go up and down completely randomly.

Pair Corralation between IShares SP and 21Shares Bitcoin

Assuming the 90 days trading horizon IShares SP is expected to generate 9.1 times less return on investment than 21Shares Bitcoin. But when comparing it to its historical volatility, iShares SP 500 is 12.82 times less risky than 21Shares Bitcoin. It trades about 0.24 of its potential returns per unit of risk. 21Shares Bitcoin ETP is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,496  in 21Shares Bitcoin ETP on September 12, 2024 and sell it today you would earn a total of  1,354  from holding 21Shares Bitcoin ETP or generate 90.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

iShares SP 500  vs.  21Shares Bitcoin ETP

iShares SP 500

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in iShares SP 500 are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares SP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

21Shares Bitcoin ETP

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Bitcoin ETP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, 21Shares Bitcoin showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with IShares SP and 21Shares Bitcoin

The main advantage of trading using opposite IShares SP and 21Shares Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares SP position performs unexpectedly, 21Shares Bitcoin 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 21Shares Bitcoin will offset losses from the drop in 21Shares Bitcoin's long position.

The idea behind iShares SP 500 and 21Shares Bitcoin ETP 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.