Correlation Between Bitcoin SV and Litecoin
Can any of the company-specific risk be diversified away by investing in both Bitcoin SV and Litecoin 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 Bitcoin SV and Litecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin SV and Litecoin, you can compare the effects of market volatilities on Bitcoin SV and Litecoin 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 Bitcoin SV with a short position of Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin SV and Litecoin.
Diversification Opportunities for Bitcoin SV and Litecoin
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bitcoin and Litecoin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin SV and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin and Bitcoin SV 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 Bitcoin SV are associated (or correlated) with Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litecoin has no effect on the direction of Bitcoin SV i.e., Bitcoin SV and Litecoin go up and down completely randomly.
Pair Corralation between Bitcoin SV and Litecoin
Assuming the 90 days trading horizon Bitcoin SV is expected to generate 1.22 times more return on investment than Litecoin. However, Bitcoin SV is 1.22 times more volatile than Litecoin. It trades about 0.02 of its potential returns per unit of risk. Litecoin is currently generating about 0.02 per unit of risk. If you would invest 7,270 in Bitcoin SV on January 20, 2024 and sell it today you would lose (506.00) from holding Bitcoin SV or give up 6.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.81% |
| Values | Daily Returns |
Bitcoin SV vs. Litecoin
Performance |
| Timeline |
| Bitcoin SV |
| Litecoin |
Bitcoin SV and Litecoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin SV and Litecoin
The main advantage of trading using opposite Bitcoin SV and Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin SV position performs unexpectedly, Litecoin 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 Litecoin will offset losses from the drop in Litecoin's long position.The idea behind Bitcoin SV and Litecoin 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |