Correlation Between Wrapped Bitcoin and LUN
Can any of the company-specific risk be diversified away by investing in both Wrapped Bitcoin and LUN 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 LUN into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wrapped Bitcoin and LUN, you can compare the effects of market volatilities on Wrapped Bitcoin and LUN 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 LUN. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wrapped Bitcoin and LUN.
Diversification Opportunities for Wrapped Bitcoin and LUN
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Wrapped and LUN is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and LUN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUN 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 LUN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUN has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and LUN go up and down completely randomly.
Pair Corralation between Wrapped Bitcoin and LUN
Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 1.02 times less return on investment than LUN. But when comparing it to its historical volatility, Wrapped Bitcoin is 1.0 times less risky than LUN. It trades about 0.25 of its potential returns per unit of risk. LUN is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1.21 in LUN on August 31, 2024 and sell it today you would earn a total of 0.82 from holding LUN or generate 67.77% 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. LUN
Performance |
| Timeline |
| Wrapped Bitcoin |
| LUN |
Wrapped Bitcoin and LUN Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Wrapped Bitcoin and LUN
The main advantage of trading using opposite Wrapped Bitcoin and LUN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped Bitcoin position performs unexpectedly, LUN 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 LUN will offset losses from the drop in LUN's long position.| Wrapped Bitcoin vs. Wrapped Beacon ETH | Wrapped Bitcoin vs. Wrapped eETH | Wrapped Bitcoin vs. Staked Ether | Wrapped Bitcoin vs. EigenLayer |
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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