Correlation Between Grayscale Bitcoin and Northern Lights
Can any of the company-specific risk be diversified away by investing in both Grayscale Bitcoin and Northern Lights 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 Northern Lights 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 Northern Lights, you can compare the effects of market volatilities on Grayscale Bitcoin and Northern Lights 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 Northern Lights. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and Northern Lights.
Diversification Opportunities for Grayscale Bitcoin and Northern Lights
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Grayscale and Northern is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Mini and Northern Lights in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Lights 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 Northern Lights. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Lights has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and Northern Lights go up and down completely randomly.
Pair Corralation between Grayscale Bitcoin and Northern Lights
Considering the 90-day investment horizon Grayscale Bitcoin Mini is expected to under-perform the Northern Lights. In addition to that, Grayscale Bitcoin is 3.98 times more volatile than Northern Lights. It trades about -0.09 of its total potential returns per unit of risk. Northern Lights is currently generating about 0.21 per unit of volatility. If you would invest 2,303 in Northern Lights on November 30, 2024 and sell it today you would earn a total of 129.00 from holding Northern Lights or generate 5.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Grayscale Bitcoin Mini vs. Northern Lights
Performance |
| Timeline |
| Grayscale Bitcoin Mini |
| Northern Lights |
Grayscale Bitcoin and Northern Lights Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Grayscale Bitcoin and Northern Lights
The main advantage of trading using opposite Grayscale Bitcoin and Northern Lights positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grayscale Bitcoin position performs unexpectedly, Northern Lights 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 Northern Lights will offset losses from the drop in Northern Lights' long position.| Grayscale Bitcoin vs. Grayscale Funds Trust | Grayscale Bitcoin vs. ProShares Trust | Grayscale Bitcoin vs. iShares Ethereum Trust | Grayscale Bitcoin vs. ProShares Trust |
| Northern Lights vs. Strategy Shares | Northern Lights vs. Freedom Day Dividend | Northern Lights vs. Franklin Templeton ETF | Northern Lights vs. iShares MSCI China |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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