Correlation Between Bitwise 10 and Small Cap
Can any of the company-specific risk be diversified away by investing in both Bitwise 10 and Small Cap 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 Bitwise 10 and Small Cap into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitwise 10 Crypto and Small Cap Special, you can compare the effects of market volatilities on Bitwise 10 and Small Cap 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 Bitwise 10 with a short position of Small Cap. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitwise 10 and Small Cap.
Diversification Opportunities for Bitwise 10 and Small Cap
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bitwise and Small is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Bitwise 10 Crypto and Small Cap Special in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Small Cap Special and Bitwise 10 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 Bitwise 10 Crypto are associated (or correlated) with Small Cap. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Small Cap Special has no effect on the direction of Bitwise 10 i.e., Bitwise 10 and Small Cap go up and down completely randomly.
Pair Corralation between Bitwise 10 and Small Cap
Given the investment horizon of 90 days Bitwise 10 Crypto is expected to generate 3.43 times more return on investment than Small Cap. However, Bitwise 10 is 3.43 times more volatile than Small Cap Special. It trades about 0.13 of its potential returns per unit of risk. Small Cap Special is currently generating about 0.05 per unit of risk. If you would invest 710.00 in Bitwise 10 Crypto on August 23, 2024 and sell it today you would earn a total of 5,038 from holding Bitwise 10 Crypto or generate 709.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bitwise 10 Crypto vs. Small Cap Special
Performance |
| Timeline |
| Bitwise 10 Crypto |
| Small Cap Special |
Bitwise 10 and Small Cap Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitwise 10 and Small Cap
The main advantage of trading using opposite Bitwise 10 and Small Cap positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitwise 10 position performs unexpectedly, Small Cap 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 Small Cap will offset losses from the drop in Small Cap's long position.| Bitwise 10 vs. Grayscale Digital Large | Bitwise 10 vs. Grayscale Ethereum Trust | Bitwise 10 vs. Grayscale Litecoin Trust | Bitwise 10 vs. Grayscale Bitcoin Cash |
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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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