Correlation Between Small-cap Value and Bitcoin Strategy

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

By analyzing existing cross correlation between Small Cap Value Profund and Bitcoin Strategy Profund, you can compare the effects of market volatilities on Small-cap Value and Bitcoin Strategy 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 Small-cap Value with a short position of Bitcoin Strategy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small-cap Value and Bitcoin Strategy.

Diversification Opportunities for Small-cap Value and Bitcoin Strategy

0.92

Correlation Coefficient

Small-cap Value  Bitcoin Strategy

Almost no diversification

The 3 months correlation between Small-cap and Bitcoin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Value Profund and Bitcoin Strategy Profund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Strategy Profund and Small-cap Value 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 Small Cap Value Profund are associated (or correlated) with Bitcoin Strategy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Strategy Profund has no effect on the direction of Small-cap Value i.e., Small-cap Value and Bitcoin Strategy go up and down completely randomly.

Pair Corralation between Small-cap Value and Bitcoin Strategy

Assuming the 90 days horizon Small Cap Value Profund is expected to generate 0.36 times more return on investment than Bitcoin Strategy. However, Small Cap Value Profund is 2.75 times less risky than Bitcoin Strategy. It trades about -0.15 of its potential returns per unit of risk. Bitcoin Strategy Profund is currently generating about -0.06 per unit of risk. If you would invest  10,962  in Small Cap Value Profund on December 30, 2024 and sell it today you would lose (1,108) from holding Small Cap Value Profund or give up 10.11% of portfolio value over 90 days.

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

Small Cap Value Profund  vs.  Bitcoin Strategy Profund

Small Cap Value

Risk-Adjusted Performance

Very Weak

Over the last 90 days Small Cap Value Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Bitcoin Strategy Profund

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitcoin Strategy Profund has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

Pair Trading with Small-cap Value and Bitcoin Strategy

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

The idea behind Small Cap Value Profund and Bitcoin Strategy Profund 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.