Correlation Between Bitcoin and LUNC

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

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

Diversification Opportunities for Bitcoin and LUNC

0.94

Correlation Coefficient

Bitcoin  LUNC

Almost no diversification

The 3 months correlation between Bitcoin and LUNC is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and LUNC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LUNC and 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 Bitcoin are associated (or correlated) with LUNC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LUNC has no effect on the direction of Bitcoin i.e., Bitcoin and LUNC go up and down completely randomly.

Pair Corralation between Bitcoin and LUNC

Assuming the 90 days trading horizon Bitcoin is expected to generate 1.03 times less return on investment than LUNC. But when comparing it to its historical volatility, Bitcoin is 1.23 times less risky than LUNC. It trades about 0.26 of its potential returns per unit of risk. LUNC is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  0.01  in LUNC on September 1, 2024 and sell it today you would earn a total of  0.01  from holding LUNC or generate 68.0% return on investment over 90 days.

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

Bitcoin  vs.  LUNC

Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bitcoin are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

LUNC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LUNC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, LUNC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and LUNC

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

The idea behind Bitcoin and LUNC 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.