Correlation Between BCPT and Wrapped Bitcoin
Can any of the company-specific risk be diversified away by investing in both BCPT and Wrapped 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 BCPT and Wrapped Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BCPT and Wrapped Bitcoin, you can compare the effects of market volatilities on BCPT and Wrapped 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 BCPT with a short position of Wrapped Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of BCPT and Wrapped Bitcoin.
Diversification Opportunities for BCPT and Wrapped Bitcoin
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between BCPT and Wrapped is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding BCPT and Wrapped Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wrapped Bitcoin and BCPT 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 BCPT are associated (or correlated) with Wrapped Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wrapped Bitcoin has no effect on the direction of BCPT i.e., BCPT and Wrapped Bitcoin go up and down completely randomly.
Pair Corralation between BCPT and Wrapped Bitcoin
Assuming the 90 days trading horizon BCPT is expected to generate 1.01 times more return on investment than Wrapped Bitcoin. However, BCPT is 1.01 times more volatile than Wrapped Bitcoin. It trades about 0.1 of its potential returns per unit of risk. Wrapped Bitcoin is currently generating about 0.1 per unit of risk. If you would invest 0.20 in BCPT on August 30, 2024 and sell it today you would earn a total of 0.08 from holding BCPT or generate 41.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BCPT vs. Wrapped Bitcoin
Performance |
| Timeline |
| BCPT |
| Wrapped Bitcoin |
BCPT and Wrapped Bitcoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BCPT and Wrapped Bitcoin
The main advantage of trading using opposite BCPT and Wrapped Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BCPT position performs unexpectedly, Wrapped 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 Wrapped Bitcoin will offset losses from the drop in Wrapped Bitcoin's long position.The idea behind BCPT and Wrapped 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.| Wrapped Bitcoin vs. Staked Ether | Wrapped Bitcoin vs. Cronos | Wrapped Bitcoin vs. XMR | Wrapped Bitcoin vs. Tether |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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