Correlation Between Bitcoin and Binance Coin

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Can any of the company-specific risk be diversified away by investing in both Bitcoin and Binance Coin 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 and Binance Coin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and Binance Coin, you can compare the effects of market volatilities on Bitcoin and Binance Coin 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 with a short position of Binance Coin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and Binance Coin.

Diversification Opportunities for Bitcoin and Binance Coin

0.95
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Bitcoin and Binance is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Binance Coin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Binance Coin and 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 Bitcoin are associated (or correlated) with Binance Coin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Binance Coin has no effect on the direction of Bitcoin i.e., Bitcoin and Binance Coin go up and down completely randomly.

Pair Corralation between Bitcoin and Binance Coin

Assuming the 90 days trading horizon Bitcoin is expected to under-perform the Binance Coin. But the crypto coin apears to be less risky and, when comparing its historical volatility, Bitcoin is 1.34 times less risky than Binance Coin. The crypto coin trades about -0.26 of its potential returns per unit of risk. The Binance Coin is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  38,593  in Binance Coin on February 22, 2022 and sell it today you would lose (7,396)  from holding Binance Coin or give up 19.16% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Bitcoin  vs.  Binance Coin

 Performance (%) 
      Timeline 
Bitcoin 
Bitcoin Performance
0 of 100
Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Crypto's basic indicators remain somewhat strong which may send shares a bit higher in June 2022. The current disturbance may also be a sign of long term up-swing for Bitcoin investors.

Bitcoin Price Channel

Binance Coin 
Binance Performance
0 of 100
Over the last 90 days Binance Coin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Binance Coin investors.

Binance Price Channel

Bitcoin and Binance Coin Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Bitcoin and Binance Coin

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

Binance Coin

Pair trading matchups for Binance Coin

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 Global Correlations module to find global opportunities by holding instruments from different markets.

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