Correlation Between Bitcoin and Global Opportunity

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

Diversification Opportunities for Bitcoin and Global Opportunity

0.85
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Bitcoin and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and GLOBAL OPPORTUNITY PORTFOLIO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Opportunity 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 Global Opportunity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Opportunity has no effect on the direction of Bitcoin i.e., Bitcoin and Global Opportunity go up and down completely randomly.

Pair Corralation between Bitcoin and Global Opportunity

Assuming the 90 days trading horizon Bitcoin is expected to generate 3.94 times more return on investment than Global Opportunity. However, Bitcoin is 3.94 times more volatile than Global Opportunity Portfolio. It trades about 0.19 of its potential returns per unit of risk. Global Opportunity Portfolio is currently generating about 0.11 per unit of risk. If you would invest  6,117,958  in Bitcoin on December 30, 2023 and sell it today you would earn a total of  985,054  from holding Bitcoin or generate 16.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Bitcoin  vs.  GLOBAL OPPORTUNITY PORTFOLIO

 Performance 
       Timeline  
Bitcoin 

Risk-Adjusted Performance

19 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.
Global Opportunity 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Global Opportunity Portfolio are ranked lower than 16 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak essential indicators, Global Opportunity showed solid returns over the last few months and may actually be approaching a breakup point.

Bitcoin and Global Opportunity Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bitcoin and Global Opportunity

The main advantage of trading using opposite Bitcoin and Global Opportunity positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, Global Opportunity 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 Global Opportunity will offset losses from the drop in Global Opportunity's long position.
The idea behind Bitcoin and Global Opportunity Portfolio 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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