Correlation Between True USD and Bitcoin
Can any of the company-specific risk be diversified away by investing in both True USD and Bitcoin 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 True USD and Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between True USD and Bitcoin, you can compare the effects of market volatilities on True USD and Bitcoin 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 True USD with a short position of Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of True USD and Bitcoin.
Diversification Opportunities for True USD and Bitcoin
Poor diversification
The 3 months correlation between True and Bitcoin is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding True USD and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin and True USD 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 True USD are associated (or correlated) with Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of True USD i.e., True USD and Bitcoin go up and down completely randomly.
Pair Corralation between True USD and Bitcoin
Assuming the 90 days trading horizon True USD is expected to under-perform the Bitcoin. But the crypto coin apears to be less risky and, when comparing its historical volatility, True USD is 6.81 times less risky than Bitcoin. The crypto coin trades about -0.09 of its potential returns per unit of risk. The Bitcoin is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 6,381,699 in Bitcoin on January 21, 2024 and sell it today you would earn a total of 12,700 from holding Bitcoin or generate 0.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
True USD vs. Bitcoin
Performance |
| Timeline |
| True USD |
| Bitcoin |
True USD and Bitcoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with True USD and Bitcoin
The main advantage of trading using opposite True USD and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if True USD position performs unexpectedly, Bitcoin 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 Bitcoin will offset losses from the drop in Bitcoin's long position.The idea behind True USD and Bitcoin 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
Other Complementary Tools
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Crypto Correlations Use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Sectors List of equity sectors categorizing publicly traded companies based on their primary business activities | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Portfolio File Import Quickly import all of your third-party portfolios from your local drive in csv format | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments |