Correlation Between Grayscale Bitcoin and US Treasury

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

By analyzing existing cross correlation between Grayscale Bitcoin Trust and US Treasury 5, you can compare the effects of market volatilities on Grayscale Bitcoin and US Treasury 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 Grayscale Bitcoin with a short position of US Treasury. Check out your portfolio center. Please also check ongoing floating volatility patterns of Grayscale Bitcoin and US Treasury.

Diversification Opportunities for Grayscale Bitcoin and US Treasury

-0.75

Correlation Coefficient

Grayscale Bitcoin  US Treasury

Pay attention - limited upside

The 3 months correlation between Grayscale and UFIV is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Grayscale Bitcoin Trust and US Treasury 5 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Treasury 5 and Grayscale 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 Grayscale Bitcoin Trust are associated (or correlated) with US Treasury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Treasury 5 has no effect on the direction of Grayscale Bitcoin i.e., Grayscale Bitcoin and US Treasury go up and down completely randomly.

Pair Corralation between Grayscale Bitcoin and US Treasury

Given the investment horizon of 90 days Grayscale Bitcoin is expected to generate 4.53 times less return on investment than US Treasury. But when comparing it to its historical volatility, Grayscale Bitcoin Trust is 12.51 times less risky than US Treasury. It trades about 0.13 of its potential returns per unit of risk. US Treasury 5 is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  0.00  in US Treasury 5 on September 4, 2024 and sell it today you would earn a total of  4,844  from holding US Treasury 5 or generate 9.223372036854776E16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.06%
Values	Daily Returns

Grayscale Bitcoin Trust  vs.  US Treasury 5

Grayscale Bitcoin Trust

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grayscale Bitcoin Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Grayscale Bitcoin exhibited solid returns over the last few months and may actually be approaching a breakup point.

US Treasury 5

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Treasury 5 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, US Treasury is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Grayscale Bitcoin and US Treasury

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

The idea behind Grayscale Bitcoin Trust and US Treasury 5 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.