Correlation Between Lyxor UCITS and WisdomTree Bitcoin

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

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

Diversification Opportunities for Lyxor UCITS and WisdomTree Bitcoin

0.45

Correlation Coefficient

Lyxor UCITS  WisdomTree Bitcoin

Very weak diversification

The 3 months correlation between Lyxor and WisdomTree is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Lyxor UCITS Japan and WisdomTree Bitcoin EUR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree Bitcoin EUR and Lyxor UCITS 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 Lyxor UCITS Japan are associated (or correlated) with WisdomTree Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree Bitcoin EUR has no effect on the direction of Lyxor UCITS i.e., Lyxor UCITS and WisdomTree Bitcoin go up and down completely randomly.

Pair Corralation between Lyxor UCITS and WisdomTree Bitcoin

Assuming the 90 days trading horizon Lyxor UCITS is expected to generate 11.53 times less return on investment than WisdomTree Bitcoin. But when comparing it to its historical volatility, Lyxor UCITS Japan is 3.84 times less risky than WisdomTree Bitcoin. It trades about 0.11 of its potential returns per unit of risk. WisdomTree Bitcoin EUR is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest  1,393  in WisdomTree Bitcoin EUR on September 5, 2024 and sell it today you would earn a total of  794.00  from holding WisdomTree Bitcoin EUR or generate 57.0% return on investment over 90 days.

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

Lyxor UCITS Japan  vs.  WisdomTree Bitcoin EUR

Lyxor UCITS Japan

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lyxor UCITS Japan are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyxor UCITS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

WisdomTree Bitcoin EUR

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WisdomTree Bitcoin EUR are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, WisdomTree Bitcoin sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyxor UCITS and WisdomTree Bitcoin

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

The idea behind Lyxor UCITS Japan and WisdomTree Bitcoin EUR 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.