Correlation Between Wrapped Bitcoin and COV

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

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

Diversification Opportunities for Wrapped Bitcoin and COV

0.99

Correlation Coefficient

Wrapped Bitcoin  COV

No risk reduction

The 3 months correlation between Wrapped and COV is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and COV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COV and Wrapped Bitcoin 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 Wrapped Bitcoin are associated (or correlated) with COV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COV has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and COV go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and COV

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to under-perform the COV. But the crypto coin apears to be less risky and, when comparing its historical volatility, Wrapped Bitcoin is 1.18 times less risky than COV. The crypto coin trades about -0.07 of its potential returns per unit of risk. The COV is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  35.00  in COV on December 30, 2024 and sell it today you would lose (4.00) from holding COV or give up 11.43% of portfolio value over 90 days.

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

Wrapped Bitcoin  vs.  COV

Wrapped Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wrapped Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for Wrapped Bitcoin shareholders.

COV

Risk-Adjusted Performance

Very Weak

Over the last 90 days COV has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Crypto's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for COV shareholders.

Pair Trading with Wrapped Bitcoin and COV

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

The idea behind Wrapped Bitcoin and COV 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.