Correlation Between Grayscale Bitcoin and First Trust
Can any of the company-specific risk be diversified away by investing in both Grayscale Bitcoin and First Trust 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 Grayscale Bitcoin and First Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Grayscale Bitcoin Mini and First Trust Nasdaq, you can compare the effects of market volatilities on Grayscale Bitcoin and First Trust 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 Grayscale Bitcoin with a short position of First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and First Trust.
Diversification Opportunities for Grayscale Bitcoin and First Trust
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Grayscale and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and First Trust Nasdaq in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Nasdaq and Grayscale 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 Grayscale Bitcoin Mini are associated (or correlated) with First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Nasdaq has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and First Trust go up and down completely randomly.
Pair Corralation between Grayscale Bitcoin and First Trust
Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to generate 2.63 times more return on investment than First Trust. However, Grayscale Bitcoin is 2.63 times more volatile than First Trust Nasdaq. It trades about 0.23 of its potential returns per unit of risk. First Trust Nasdaq is currently generating about 0.14 per unit of risk. If you would invest 2,985 in Grayscale Bitcoin Mini on November 2, 2024 and sell it today you would earn a total of 1,669 from holding Grayscale Bitcoin Mini or generate 55.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grayscale Bitcoin Mini vs. First Trust Nasdaq
Performance |
| Timeline |
| Grayscale Bitcoin Mini |
| First Trust Nasdaq |
Grayscale Bitcoin and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grayscale Bitcoin and First Trust
The main advantage of trading using opposite Grayscale Bitcoin and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grayscale Bitcoin position performs unexpectedly, First Trust 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 First Trust will offset losses from the drop in First Trust's long position.| Grayscale Bitcoin vs. ProShares Trust | Grayscale Bitcoin vs. iShares Ethereum Trust | Grayscale Bitcoin vs. ProShares Trust | Grayscale Bitcoin vs. Grayscale Ethereum Trust |
| First Trust vs. First Trust Nasdaq | First Trust vs. Global X Aging | First Trust vs. Invesco Nasdaq Biotechnology | First Trust vs. First Trust Indxx |
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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