Correlation Between Bitcoin SV and DOW

By analyzing existing cross correlation between Bitcoin SV and DOW, you can compare the effects of market volatilities on Bitcoin SV and DOW 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 DOW. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin SV and DOW.
Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both Bitcoin SV and DOW 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 DOW into the same portfolio, which is an essential part of the fundamental portfolio management process.

Diversification Opportunities for Bitcoin SV and DOW

0.29
  Correlation Coefficient
Bitcoin SV
DOW

Modest diversification

The 3 months correlation between Bitcoin and DOW is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin SV and DOW in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on DOW 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 DOW. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOW has no effect on the direction of Bitcoin SV i.e., Bitcoin SV and DOW go up and down completely randomly.
    Optimize

Pair Corralation between Bitcoin SV and DOW

Assuming the 90 days trading horizon Bitcoin SV is expected to under-perform the DOW. In addition to that, Bitcoin SV is 5.5 times more volatile than DOW. It trades about -0.14 of its total potential returns per unit of risk. DOW is currently generating about 0.06 per unit of volatility. If you would invest  2,757,244  in DOW on October 30, 2021 and sell it today you would earn a total of  658,834  from holding DOW or generate 23.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy17.31%
ValuesDaily Returns

Bitcoin SV  vs.  DOW

 Performance (%) 
      Timeline 

Bitcoin SV and DOW Volatility Contrast

 Predicted Return Density 
      Returns 

DOW

Pair trading matchups for DOW

Sentinelone Inc vs. DOW
GM vs. DOW
Ford vs. DOW
Visa vs. DOW
Microsoft Corp vs. DOW
Alphabet vs. DOW
Vmware vs. DOW
Citigroup vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.

Pair Trading with Bitcoin SV and DOW

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

DOW

Pair trading matchups for DOW

Citigroup vs. DOW
Vmware vs. DOW
Alphabet vs. DOW
USA Quality vs. DOW
GM vs. DOW
Du Pont vs. DOW
Microsoft Corp vs. DOW
Dividend Appreciation vs. DOW
Ford vs. DOW
Sentinelone Inc vs. DOW
The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against DOW as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. DOW's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, DOW's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to DOW.
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 Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

Other Complementary Tools

Money Flow Index
Determine momentum by analyzing Money Flow Index and other technical indicators
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Competition Analyzer
Analyze and compare many basic indicators for a group of related or unrelated entities
Go
Efficient Frontier
Plot and analyze your portfolio and positions against risk-return landscape of the market.
Go
Portfolio Volatility
Check portfolio volatility and analyze historical return density to properly model market risk
Go