Correlation Between Wrapped Bitcoin and Ethereum
Can any of the company-specific risk be diversified away by investing in both Wrapped Bitcoin and Ethereum 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 Wrapped Bitcoin and Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wrapped Bitcoin and Ethereum, you can compare the effects of market volatilities on Wrapped Bitcoin and Ethereum 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 Wrapped Bitcoin with a short position of Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wrapped Bitcoin and Ethereum.
Diversification Opportunities for Wrapped Bitcoin and Ethereum
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wrapped and Ethereum is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and Ethereum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ethereum and Wrapped 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 Wrapped Bitcoin are associated (or correlated) with Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ethereum has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and Ethereum go up and down completely randomly.
Pair Corralation between Wrapped Bitcoin and Ethereum
Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 1.07 times less return on investment than Ethereum. In addition to that, Wrapped Bitcoin is 1.01 times more volatile than Ethereum. It trades about 0.29 of its total potential returns per unit of risk. Ethereum is currently generating about 0.31 per unit of volatility. If you would invest 263,816 in Ethereum on August 28, 2024 and sell it today you would earn a total of 78,373 from holding Ethereum or generate 29.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Wrapped Bitcoin vs. Ethereum
Performance |
| Timeline |
| Wrapped Bitcoin |
| Ethereum |
Wrapped Bitcoin and Ethereum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wrapped Bitcoin and Ethereum
The main advantage of trading using opposite Wrapped Bitcoin and Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped Bitcoin position performs unexpectedly, Ethereum 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 Ethereum will offset losses from the drop in Ethereum's long position.| Wrapped Bitcoin vs. Solana | Wrapped Bitcoin vs. XRP | Wrapped Bitcoin vs. Sui | Wrapped Bitcoin vs. Staked Ether |
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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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