Correlation Between Tidal Trust and Grayscale Bitcoin

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

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

Diversification Opportunities for Tidal Trust and Grayscale Bitcoin

0.87

Correlation Coefficient

Tidal Trust  Grayscale Bitcoin

Very poor diversification

The 3 months correlation between Tidal and Grayscale is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Tidal Trust II and Grayscale Bitcoin Mini in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Bitcoin Mini and Tidal Trust 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 Tidal Trust II are associated (or correlated) with Grayscale Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Bitcoin Mini has no effect on the direction of Tidal Trust i.e., Tidal Trust and Grayscale Bitcoin go up and down completely randomly.

Pair Corralation between Tidal Trust and Grayscale Bitcoin

Considering the 90-day investment horizon Tidal Trust is expected to generate 2.78 times less return on investment than Grayscale Bitcoin. But when comparing it to its historical volatility, Tidal Trust II is 1.34 times less risky than Grayscale Bitcoin. It trades about 0.1 of its potential returns per unit of risk. Grayscale Bitcoin Mini is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,030  in Grayscale Bitcoin Mini on October 24, 2024 and sell it today you would earn a total of  1,596  from holding Grayscale Bitcoin Mini or generate 52.67% return on investment over 90 days.

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

Tidal Trust II  vs.  Grayscale Bitcoin Mini

Tidal Trust II

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tidal Trust II are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Tidal Trust showed solid returns over the last few months and may actually be approaching a breakup point.

Grayscale Bitcoin Mini

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Mini are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tidal Trust and Grayscale Bitcoin

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

The idea behind Tidal Trust II and Grayscale Bitcoin Mini 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.