Correlation Between XBTF and Grayscale Bitcoin

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

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

Diversification Opportunities for XBTF and Grayscale Bitcoin

0.57

Correlation Coefficient

XBTF  Grayscale Bitcoin

Very weak diversification

The 3 months correlation between XBTF and Grayscale is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding XBTF and Grayscale Bitcoin Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grayscale Bitcoin Trust and XBTF 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 XBTF are associated (or correlated) with Grayscale Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grayscale Bitcoin Trust has no effect on the direction of XBTF i.e., XBTF and Grayscale Bitcoin go up and down completely randomly.

Pair Corralation between XBTF and Grayscale Bitcoin

If you would invest  4,466  in Grayscale Bitcoin Trust on September 5, 2024 and sell it today you would earn a total of  3,129  from holding Grayscale Bitcoin Trust or generate 70.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

XBTF  vs.  Grayscale Bitcoin Trust

XBTF

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XBTF has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, XBTF is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Grayscale Bitcoin Trust

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XBTF and Grayscale Bitcoin

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

The idea behind XBTF and Grayscale 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 Global Correlations module to find global opportunities by holding instruments from different markets.