Correlation Between Bitcoin SV and Numeraire

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

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

Diversification Opportunities for Bitcoin SV and Numeraire

0.75

Correlation Coefficient

Bitcoin SV  Numeraire

Poor diversification

The 3 months correlation between Bitcoin and Numeraire is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin SV and Numeraire in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Numeraire and Bitcoin SV 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 Bitcoin SV are associated (or correlated) with Numeraire. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Numeraire has no effect on the direction of Bitcoin SV i.e., Bitcoin SV and Numeraire go up and down completely randomly.

Pair Corralation between Bitcoin SV and Numeraire

Assuming the 90 days trading horizon Bitcoin SV is expected to generate 1.01 times less return on investment than Numeraire. But when comparing it to its historical volatility, Bitcoin SV is 1.12 times less risky than Numeraire. It trades about 0.19 of its potential returns per unit of risk. Numeraire is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,357  in Numeraire on September 2, 2024 and sell it today you would earn a total of  863.00  from holding Numeraire or generate 63.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Bitcoin SV  vs.  Numeraire

Bitcoin SV

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin SV are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bitcoin SV exhibited solid returns over the last few months and may actually be approaching a breakup point.

Numeraire

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Numeraire are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Numeraire exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin SV and Numeraire

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

The idea behind Bitcoin SV and Numeraire 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.