Correlation Between 21Shares Bitcoin and 21Shares Ethereum

Can any of the company-specific risk be diversified away by investing in both 21Shares Bitcoin and 21Shares 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 21Shares Bitcoin and 21Shares Ethereum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 21Shares Bitcoin ETP and 21Shares Ethereum Core, you can compare the effects of market volatilities on 21Shares Bitcoin and 21Shares 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 21Shares Bitcoin with a short position of 21Shares Ethereum. Check out your portfolio center. Please also check ongoing floating volatility patterns of 21Shares Bitcoin and 21Shares Ethereum.

Diversification Opportunities for 21Shares Bitcoin and 21Shares Ethereum

0.95

Correlation Coefficient

21Shares Bitcoin  21Shares Ethereum

Almost no diversification

The 3 months correlation between 21Shares and 21Shares is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding 21Shares Bitcoin ETP and 21Shares Ethereum Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 21Shares Ethereum Core and 21Shares 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 21Shares Bitcoin ETP are associated (or correlated) with 21Shares Ethereum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 21Shares Ethereum Core has no effect on the direction of 21Shares Bitcoin i.e., 21Shares Bitcoin and 21Shares Ethereum go up and down completely randomly.

Pair Corralation between 21Shares Bitcoin and 21Shares Ethereum

Assuming the 90 days trading horizon 21Shares Bitcoin is expected to generate 1.05 times less return on investment than 21Shares Ethereum. But when comparing it to its historical volatility, 21Shares Bitcoin ETP is 1.43 times less risky than 21Shares Ethereum. It trades about 0.33 of its potential returns per unit of risk. 21Shares Ethereum Core is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  841.00  in 21Shares Ethereum Core on September 14, 2024 and sell it today you would earn a total of  614.00  from holding 21Shares Ethereum Core or generate 73.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	92.19%
Values	Daily Returns

21Shares Bitcoin ETP  vs.  21Shares Ethereum Core

21Shares Bitcoin ETP

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Bitcoin ETP are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, 21Shares Bitcoin sustained solid returns over the last few months and may actually be approaching a breakup point.

21Shares Ethereum Core

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 21Shares Ethereum Core are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, 21Shares Ethereum showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 21Shares Bitcoin and 21Shares Ethereum

The main advantage of trading using opposite 21Shares Bitcoin and 21Shares Ethereum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 21Shares Bitcoin position performs unexpectedly, 21Shares 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 21Shares Ethereum will offset losses from the drop in 21Shares Ethereum's long position.

The idea behind 21Shares Bitcoin ETP and 21Shares Ethereum Core 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.