Correlation Between Wrapped Bitcoin and LUNC

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

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

Diversification Opportunities for Wrapped Bitcoin and LUNC

0.52

Correlation Coefficient

Wrapped Bitcoin  LUNC

Very weak diversification

The 3 months correlation between Wrapped and LUNC is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and LUNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUNC 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 LUNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUNC has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and LUNC go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and LUNC

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 0.5 times more return on investment than LUNC. However, Wrapped Bitcoin is 1.99 times less risky than LUNC. It trades about -0.07 of its potential returns per unit of risk. LUNC is currently generating about -0.17 per unit of risk. If you would invest  9,321,454  in Wrapped Bitcoin on December 30, 2024 and sell it today you would lose (1,086,636) from holding Wrapped Bitcoin or give up 11.66% of portfolio value over 90 days.

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

Wrapped Bitcoin  vs.  LUNC

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.

LUNC

Risk-Adjusted Performance

Very Weak

Over the last 90 days LUNC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for LUNC shareholders.

Pair Trading with Wrapped Bitcoin and LUNC

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

The idea behind Wrapped Bitcoin and LUNC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.