Correlation Between Bitcoin Gold and ARK

Can any of the company-specific risk be diversified away by investing in both Bitcoin Gold and ARK 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 Gold and ARK into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bitcoin Gold and ARK, you can compare the effects of market volatilities on Bitcoin Gold and ARK 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 Gold with a short position of ARK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin Gold and ARK.

Diversification Opportunities for Bitcoin Gold and ARK

0.68

Correlation Coefficient

Bitcoin Gold  ARK

Poor diversification

The 3 months correlation between Bitcoin and ARK is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin Gold and ARK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARK and Bitcoin Gold 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 Gold are associated (or correlated) with ARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARK has no effect on the direction of Bitcoin Gold i.e., Bitcoin Gold and ARK go up and down completely randomly.

Pair Corralation between Bitcoin Gold and ARK

Assuming the 90 days trading horizon Bitcoin Gold is expected to generate 1.63 times less return on investment than ARK. But when comparing it to its historical volatility, Bitcoin Gold is 1.74 times less risky than ARK. It trades about 0.07 of its potential returns per unit of risk. ARK is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  39.00  in ARK on January 24, 2024 and sell it today you would earn a total of  46.00  from holding ARK or generate 117.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bitcoin Gold  vs.  ARK

Bitcoin Gold

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin Gold are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Bitcoin Gold exhibited solid returns over the last few months and may actually be approaching a breakup point.

ARK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, ARK is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bitcoin Gold and ARK

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

The idea behind Bitcoin Gold and ARK 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.