Correlation Between Bitcoin and NEXTDC
Can any of the company-specific risk be diversified away by investing in both Bitcoin and NEXTDC 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 and NEXTDC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and NEXTDC LTD, you can compare the effects of market volatilities on Bitcoin and NEXTDC 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 with a short position of NEXTDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and NEXTDC.
Diversification Opportunities for Bitcoin and NEXTDC
Excellent diversification
The 3 months correlation between Bitcoin and NEXTDC is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and NEXTDC LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NEXTDC LTD and 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 Bitcoin are associated (or correlated) with NEXTDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NEXTDC LTD has no effect on the direction of Bitcoin i.e., Bitcoin and NEXTDC go up and down completely randomly.
Pair Corralation between Bitcoin and NEXTDC
Assuming the 90 days trading horizon Bitcoin is expected to generate 1.08 times more return on investment than NEXTDC. However, Bitcoin is 1.08 times more volatile than NEXTDC LTD. It trades about 0.08 of its potential returns per unit of risk. NEXTDC LTD is currently generating about -0.1 per unit of risk. If you would invest 8,804,054 in Bitcoin on October 11, 2024 and sell it today you would earn a total of 696,940 from holding Bitcoin or generate 7.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.7% |
| Values | Daily Returns |
Bitcoin vs. NEXTDC LTD
Performance |
| Timeline |
| Bitcoin |
| NEXTDC LTD |
Bitcoin and NEXTDC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin and NEXTDC
The main advantage of trading using opposite Bitcoin and NEXTDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, NEXTDC 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 NEXTDC will offset losses from the drop in NEXTDC's long position.The idea behind Bitcoin and NEXTDC LTD 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.| NEXTDC vs. CODERE ONLINE LUX | NEXTDC vs. OPKO HEALTH | NEXTDC vs. CITY OFFICE REIT | NEXTDC vs. US Physical Therapy |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
Other Complementary Tools
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Positions Ratings Determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities |