Correlation Between Bitcoin SV and HEDG
Can any of the company-specific risk be diversified away by investing in both Bitcoin SV and HEDG 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 HEDG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin SV and HEDG, you can compare the effects of market volatilities on Bitcoin SV and HEDG 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 HEDG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin SV and HEDG.
Diversification Opportunities for Bitcoin SV and HEDG
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Bitcoin and HEDG is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin SV and HEDG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEDG 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 HEDG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEDG has no effect on the direction of Bitcoin SV i.e., Bitcoin SV and HEDG go up and down completely randomly.
Pair Corralation between Bitcoin SV and HEDG
Assuming the 90 days trading horizon Bitcoin SV is expected to under-perform the HEDG. But the crypto coin apears to be less risky and, when comparing its historical volatility, Bitcoin SV is 6.21 times less risky than HEDG. The crypto coin trades about -0.15 of its potential returns per unit of risk. The HEDG is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2.50 in HEDG on January 26, 2024 and sell it today you would earn a total of 1.29 from holding HEDG or generate 51.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bitcoin SV vs. HEDG
Performance |
| Timeline |
| Bitcoin SV |
| HEDG |
Bitcoin SV and HEDG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin SV and HEDG
The main advantage of trading using opposite Bitcoin SV and HEDG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin SV position performs unexpectedly, HEDG 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 HEDG will offset losses from the drop in HEDG's long position.The idea behind Bitcoin SV and HEDG 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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