Correlation Between Bitcoin and Global Payments
Can any of the company-specific risk be diversified away by investing in both Bitcoin and Global Payments 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 Global Payments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and Global Payments, you can compare the effects of market volatilities on Bitcoin and Global Payments 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 Global Payments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and Global Payments.
Diversification Opportunities for Bitcoin and Global Payments
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bitcoin and Global is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Global Payments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Payments 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 Global Payments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Payments has no effect on the direction of Bitcoin i.e., Bitcoin and Global Payments go up and down completely randomly.
Pair Corralation between Bitcoin and Global Payments
Assuming the 90 days trading horizon Bitcoin is expected to generate 1.52 times more return on investment than Global Payments. However, Bitcoin is 1.52 times more volatile than Global Payments. It trades about 0.15 of its potential returns per unit of risk. Global Payments is currently generating about -0.06 per unit of risk. If you would invest 9,776,949 in Bitcoin on October 20, 2024 and sell it today you would earn a total of 658,751 from holding Bitcoin or generate 6.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Bitcoin vs. Global Payments
Performance |
| Timeline |
| Bitcoin |
| Global Payments |
Bitcoin and Global Payments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin and Global Payments
The main advantage of trading using opposite Bitcoin and Global Payments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, Global Payments 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 Global Payments will offset losses from the drop in Global Payments' long position.The idea behind Bitcoin and Global Payments 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.| Global Payments vs. Copart Inc | Global Payments vs. ABM Industries Incorporated | Global Payments vs. Thomson Reuters Corp | Global Payments vs. Aramark Holdings |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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