Correlation Between IPath Series and ProShares Bitcoin

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

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

Diversification Opportunities for IPath Series and ProShares Bitcoin

-0.77

Correlation Coefficient

IPath Series  ProShares Bitcoin

Pay attention - limited upside

The 3 months correlation between IPath and ProShares is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding iPath Series B and ProShares Bitcoin Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProShares Bitcoin and IPath Series 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 iPath Series B are associated (or correlated) with ProShares Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProShares Bitcoin has no effect on the direction of IPath Series i.e., IPath Series and ProShares Bitcoin go up and down completely randomly.

Pair Corralation between IPath Series and ProShares Bitcoin

Considering the 90-day investment horizon iPath Series B is expected to generate 1.32 times more return on investment than ProShares Bitcoin. However, IPath Series is 1.32 times more volatile than ProShares Bitcoin Strategy. It trades about 0.03 of its potential returns per unit of risk. ProShares Bitcoin Strategy is currently generating about -0.06 per unit of risk. If you would invest  4,808  in iPath Series B on December 20, 2024 and sell it today you would earn a total of  110.00  from holding iPath Series B or generate 2.29% return on investment over 90 days.

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

iPath Series B  vs.  ProShares Bitcoin Strategy

iPath Series B

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in iPath Series B are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, IPath Series may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ProShares Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days ProShares Bitcoin Strategy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Etf's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with IPath Series and ProShares Bitcoin

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

The idea behind iPath Series B and ProShares Bitcoin Strategy 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 Global Correlations module to find global opportunities by holding instruments from different markets.