Correlation Between NVIDIA and Bitwise Funds

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

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

Diversification Opportunities for NVIDIA and Bitwise Funds

0.26

Correlation Coefficient

NVIDIA  Bitwise Funds

Modest diversification

The 3 months correlation between NVIDIA and Bitwise is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding NVIDIA and Bitwise Funds Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitwise Funds Trust and NVIDIA 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 NVIDIA are associated (or correlated) with Bitwise Funds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitwise Funds Trust has no effect on the direction of NVIDIA i.e., NVIDIA and Bitwise Funds go up and down completely randomly.

Pair Corralation between NVIDIA and Bitwise Funds

Given the investment horizon of 90 days NVIDIA is expected to generate 0.47 times more return on investment than Bitwise Funds. However, NVIDIA is 2.15 times less risky than Bitwise Funds. It trades about -0.11 of its potential returns per unit of risk. Bitwise Funds Trust is currently generating about -0.3 per unit of risk. If you would invest  14,513  in NVIDIA on October 5, 2024 and sell it today you would lose (682.00) from holding NVIDIA or give up 4.7% of portfolio value over 90 days.

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

NVIDIA  vs.  Bitwise Funds Trust

NVIDIA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NVIDIA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, NVIDIA may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Bitwise Funds Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise Funds Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Bitwise Funds demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NVIDIA and Bitwise Funds

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

The idea behind NVIDIA and Bitwise Funds Trust 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..