Correlation Between Smart Share and BTC Digital

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

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

Diversification Opportunities for Smart Share and BTC Digital

0.11

Correlation Coefficient

Smart Share  BTC Digital

Average diversification

The 3 months correlation between Smart and BTC is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Smart Share Global and BTC Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTC Digital and Smart Share 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 Smart Share Global are associated (or correlated) with BTC Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTC Digital has no effect on the direction of Smart Share i.e., Smart Share and BTC Digital go up and down completely randomly.

Pair Corralation between Smart Share and BTC Digital

Allowing for the 90-day total investment horizon Smart Share is expected to generate 18.6 times less return on investment than BTC Digital. But when comparing it to its historical volatility, Smart Share Global is 7.09 times less risky than BTC Digital. It trades about 0.07 of its potential returns per unit of risk. BTC Digital is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2.10  in BTC Digital on September 3, 2024 and sell it today you would earn a total of  4.47  from holding BTC Digital or generate 212.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	79.69%
Values	Daily Returns

Smart Share Global  vs.  BTC Digital

Smart Share Global

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Smart Share Global are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Smart Share displayed solid returns over the last few months and may actually be approaching a breakup point.

BTC Digital

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Digital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, BTC Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Smart Share and BTC Digital

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

The idea behind Smart Share Global and BTC Digital 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.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.