Correlation Between Wrapped Bitcoin and Capital World
Can any of the company-specific risk be diversified away by investing in both Wrapped Bitcoin and Capital World 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 Wrapped Bitcoin and Capital World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wrapped Bitcoin and Capital World Growth, you can compare the effects of market volatilities on Wrapped Bitcoin and Capital World 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 Wrapped Bitcoin with a short position of Capital World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wrapped Bitcoin and Capital World.
Diversification Opportunities for Wrapped Bitcoin and Capital World
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wrapped and Capital is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and Capital World Growth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital World Growth and Wrapped 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 Wrapped Bitcoin are associated (or correlated) with Capital World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital World Growth has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and Capital World go up and down completely randomly.
Pair Corralation between Wrapped Bitcoin and Capital World
Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 3.47 times more return on investment than Capital World. However, Wrapped Bitcoin is 3.47 times more volatile than Capital World Growth. It trades about 0.06 of its potential returns per unit of risk. Capital World Growth is currently generating about 0.06 per unit of risk. If you would invest 2,901,721 in Wrapped Bitcoin on January 30, 2024 and sell it today you would earn a total of 3,446,954 from holding Wrapped Bitcoin or generate 118.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 96.3% |
Values | Daily Returns |
Wrapped Bitcoin vs. Capital World Growth
Performance |
Timeline |
Wrapped Bitcoin |
Capital World Growth |
Wrapped Bitcoin and Capital World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Wrapped Bitcoin and Capital World
The main advantage of trading using opposite Wrapped Bitcoin and Capital World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped Bitcoin position performs unexpectedly, Capital World 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 Capital World will offset losses from the drop in Capital World's long position.Wrapped Bitcoin vs. Solana | Wrapped Bitcoin vs. XRP | Wrapped Bitcoin vs. Staked Ether | Wrapped Bitcoin vs. The Open Network |
Capital World vs. American Funds Capital | Capital World vs. American Funds Capital | Capital World vs. Capital World Growth | Capital World vs. Capital World Growth |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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