Correlation Between Wrapped Bitcoin and Litecoin
Can any of the company-specific risk be diversified away by investing in both Wrapped Bitcoin and Litecoin 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 Litecoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wrapped Bitcoin and Litecoin, you can compare the effects of market volatilities on Wrapped Bitcoin and Litecoin 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 Litecoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wrapped Bitcoin and Litecoin.
Diversification Opportunities for Wrapped Bitcoin and Litecoin
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Wrapped and Litecoin is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and Litecoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Litecoin 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 Litecoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Litecoin has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and Litecoin go up and down completely randomly.
Pair Corralation between Wrapped Bitcoin and Litecoin
Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 1.92 times more return on investment than Litecoin. However, Wrapped Bitcoin is 1.92 times more volatile than Litecoin. It trades about 0.1 of its potential returns per unit of risk. Litecoin is currently generating about 0.03 per unit of risk. If you would invest 1,683,933 in Wrapped Bitcoin on August 23, 2024 and sell it today you would earn a total of 8,165,652 from holding Wrapped Bitcoin or generate 484.92% 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. Litecoin
Performance |
| Timeline |
| Wrapped Bitcoin |
| Litecoin |
Wrapped Bitcoin and Litecoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wrapped Bitcoin and Litecoin
The main advantage of trading using opposite Wrapped Bitcoin and Litecoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped Bitcoin position performs unexpectedly, Litecoin 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 Litecoin will offset losses from the drop in Litecoin'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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Insider Screener Find insiders across different sectors to evaluate their impact on performance | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets |