Correlation Between Universal and Bitcoin Depot

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

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

Diversification Opportunities for Universal and Bitcoin Depot

0.65

Correlation Coefficient

Universal  Bitcoin Depot

Poor diversification

The 3 months correlation between Universal and Bitcoin is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Universal and Bitcoin Depot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin Depot and Universal 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 Universal are associated (or correlated) with Bitcoin Depot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin Depot has no effect on the direction of Universal i.e., Universal and Bitcoin Depot go up and down completely randomly.

Pair Corralation between Universal and Bitcoin Depot

Considering the 90-day investment horizon Universal is expected to generate 4.97 times less return on investment than Bitcoin Depot. But when comparing it to its historical volatility, Universal is 5.81 times less risky than Bitcoin Depot. It trades about 0.1 of its potential returns per unit of risk. Bitcoin Depot is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  153.00  in Bitcoin Depot on September 2, 2024 and sell it today you would earn a total of  46.00  from holding Bitcoin Depot or generate 30.07% return on investment over 90 days.

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

Universal  vs.  Bitcoin Depot

Universal

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Universal are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Universal may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bitcoin Depot

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Depot are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Bitcoin Depot displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Universal and Bitcoin Depot

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

The idea behind Universal and Bitcoin Depot 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.