Correlation Between Grayscale Bitcoin and First Trust

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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 Trust and First Trust SkyBridge, 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

0.96
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Grayscale and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and First Trust SkyBridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust SkyBridge 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 Trust 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 SkyBridge 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

Given the investment horizon of 90 days Grayscale Bitcoin Trust is expected to generate 0.57 times more return on investment than First Trust. However, Grayscale Bitcoin Trust is 1.76 times less risky than First Trust. It trades about 0.48 of its potential returns per unit of risk. First Trust SkyBridge is currently generating about 0.24 per unit of risk. If you would invest  5,309  in Grayscale Bitcoin Trust on August 26, 2024 and sell it today you would earn a total of  2,578  from holding Grayscale Bitcoin Trust or generate 48.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Grayscale Bitcoin Trust  vs.  First Trust SkyBridge

 Performance 
       Timeline  
Grayscale Bitcoin Trust 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.
First Trust SkyBridge 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in First Trust SkyBridge are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, First Trust unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.
The idea behind Grayscale Bitcoin Trust and First Trust SkyBridge 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.
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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