Correlation Between Wrapped Bitcoin and SALT

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

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

Diversification Opportunities for Wrapped Bitcoin and SALT

-0.25

Correlation Coefficient

Wrapped Bitcoin  SALT

Very good diversification

The 3 months correlation between Wrapped and SALT is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and SALT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALT 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 SALT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALT has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and SALT go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and SALT

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to under-perform the SALT. But the crypto coin apears to be less risky and, when comparing its historical volatility, Wrapped Bitcoin is 34.44 times less risky than SALT. The crypto coin trades about -0.07 of its potential returns per unit of risk. The SALT is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  0.56  in SALT on December 30, 2024 and sell it today you would earn a total of  1.03  from holding SALT or generate 183.73% return on investment over 90 days.

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

Wrapped Bitcoin  vs.  SALT

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.

SALT

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SALT are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, SALT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wrapped Bitcoin and SALT

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

The idea behind Wrapped Bitcoin and SALT 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.