Correlation Between Vanguard and IShares Bitcoin

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

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

Diversification Opportunities for Vanguard and IShares Bitcoin

0.62

Correlation Coefficient

Vanguard  IShares Bitcoin

Poor diversification

The 3 months correlation between Vanguard and IShares is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vanguard SP 500 and iShares Bitcoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Bitcoin Trust and Vanguard 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 Vanguard SP 500 are associated (or correlated) with IShares Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Bitcoin Trust has no effect on the direction of Vanguard i.e., Vanguard and IShares Bitcoin go up and down completely randomly.

Pair Corralation between Vanguard and IShares Bitcoin

Considering the 90-day investment horizon Vanguard is expected to generate 16.3 times less return on investment than IShares Bitcoin. But when comparing it to its historical volatility, Vanguard SP 500 is 4.3 times less risky than IShares Bitcoin. It trades about 0.06 of its potential returns per unit of risk. iShares Bitcoin Trust is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,857  in iShares Bitcoin Trust on October 20, 2024 and sell it today you would earn a total of  2,105  from holding iShares Bitcoin Trust or generate 54.58% return on investment over 90 days.

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

Vanguard SP 500  vs.  iShares Bitcoin Trust

Vanguard SP 500

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Vanguard SP 500 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Vanguard is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

iShares Bitcoin Trust

Risk-Adjusted Performance

16 of 100

Solid

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

Pair Trading with Vanguard and IShares Bitcoin

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

The idea behind Vanguard SP 500 and iShares Bitcoin 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.