Correlation Between Bitcoin and SP 500

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Can any of the company-specific risk be diversified away by investing in both Bitcoin and SP 500 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 SP 500 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and SP 500 INDEX, you can compare the effects of market volatilities on Bitcoin and SP 500 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 SP 500. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and SP 500.

Diversification Opportunities for Bitcoin and SP 500

  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Bitcoin and SPXKX is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and SP 500 INDEX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP 500 INDEX 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 SP 500. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP 500 INDEX has no effect on the direction of Bitcoin i.e., Bitcoin and SP 500 go up and down completely randomly.

Pair Corralation between Bitcoin and SP 500

If you would invest (100.00) in SP 500 INDEX on July 5, 2023 and sell it today you would earn a total of  100.00  from holding SP 500 INDEX or generate -100.0% return on investment over 90 days.
Time Period3 Months [change]
ValuesDaily Returns

Bitcoin  vs.  SP 500 INDEX


Bitcoin Performance

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Over the last 90 days 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 Bitcoin shareholders.

SPXKX Performance

0 of 100
Over the last 90 days SP 500 INDEX has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward-looking signals, SP 500 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Bitcoin and SP 500 Volatility Contrast

   Predicted Return Density   

Pair Trading with Bitcoin and SP 500

The main advantage of trading using opposite Bitcoin and SP 500 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, SP 500 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 SP 500 will offset losses from the drop in SP 500's long position.
The idea behind Bitcoin and SP 500 INDEX 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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