Correlation Between Wrapped Bitcoin and SOLVE

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Can any of the company-specific risk be diversified away by investing in both Wrapped Bitcoin and SOLVE 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 SOLVE into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Wrapped Bitcoin and SOLVE, you can compare the effects of market volatilities on Wrapped Bitcoin and SOLVE 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 SOLVE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wrapped Bitcoin and SOLVE.

Diversification Opportunities for Wrapped Bitcoin and SOLVE

WrappedSOLVEDiversified AwayWrappedSOLVEDiversified Away100%
-0.21
  Correlation Coefficient

Very good diversification

The 3 months correlation between Wrapped and SOLVE is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and SOLVE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLVE 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 SOLVE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLVE has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and SOLVE go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and SOLVE

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to under-perform the SOLVE. But the crypto coin apears to be less risky and, when comparing its historical volatility, Wrapped Bitcoin is 11.65 times less risky than SOLVE. The crypto coin trades about -0.23 of its potential returns per unit of risk. The SOLVE is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.21  in SOLVE on November 25, 2024 and sell it today you would lose (0.02) from holding SOLVE or give up 7.78% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Wrapped Bitcoin  vs.  SOLVE

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -80-60-40-2002040
JavaScript chart by amCharts 3.21.15WBTC SOLVE
       Timeline  
Wrapped Bitcoin 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped Bitcoin are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, Wrapped Bitcoin is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb94,00096,00098,000100,000102,000104,000106,000
SOLVE 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days SOLVE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for SOLVE shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.00099999999999999820.0020.0040.0060.0080.010.012

Wrapped Bitcoin and SOLVE Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.61-2.7-1.8-0.89-0.010.891.792.693.59 0.010.020.030.040.050.060.07
JavaScript chart by amCharts 3.21.15WBTC SOLVE
       Returns  

Pair Trading with Wrapped Bitcoin and SOLVE

The main advantage of trading using opposite Wrapped Bitcoin and SOLVE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wrapped Bitcoin position performs unexpectedly, SOLVE 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 SOLVE will offset losses from the drop in SOLVE's long position.
The idea behind Wrapped Bitcoin and SOLVE 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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