Correlation Between Bitcoin and Invesco DWA
Can any of the company-specific risk be diversified away by investing in both Bitcoin and Invesco DWA 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 Invesco DWA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bitcoin and Invesco DWA Developed, you can compare the effects of market volatilities on Bitcoin and Invesco DWA 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 Invesco DWA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bitcoin and Invesco DWA.
Diversification Opportunities for Bitcoin and Invesco DWA
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bitcoin and Invesco is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and Invesco DWA Developed in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco DWA Developed 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 Invesco DWA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco DWA Developed has no effect on the direction of Bitcoin i.e., Bitcoin and Invesco DWA go up and down completely randomly.
Pair Corralation between Bitcoin and Invesco DWA
Assuming the 90 days trading horizon Bitcoin is expected to generate 2.91 times more return on investment than Invesco DWA. However, Bitcoin is 2.91 times more volatile than Invesco DWA Developed. It trades about 0.15 of its potential returns per unit of risk. Invesco DWA Developed is currently generating about 0.1 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 Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
Bitcoin vs. Invesco DWA Developed
Performance |
| Timeline |
| Bitcoin |
| Invesco DWA Developed |
Bitcoin and Invesco DWA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bitcoin and Invesco DWA
The main advantage of trading using opposite Bitcoin and Invesco DWA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitcoin position performs unexpectedly, Invesco DWA 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 Invesco DWA will offset losses from the drop in Invesco DWA's long position.The idea behind Bitcoin and Invesco DWA Developed 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.| Invesco DWA vs. Invesco DWA Emerging | Invesco DWA vs. Invesco DWA Momentum | Invesco DWA vs. Invesco DWA SmallCap | Invesco DWA vs. Invesco FTSE RAFI |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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