Correlation Between Wrapped Bitcoin and BIX

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

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

Diversification Opportunities for Wrapped Bitcoin and BIX

1.0

Correlation Coefficient

Wrapped Bitcoin  BIX

No risk reduction

The 3 months correlation between Wrapped and BIX is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and BIX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BIX and Wrapped 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 Wrapped Bitcoin are associated (or correlated) with BIX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BIX has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and BIX go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and BIX

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 0.99 times more return on investment than BIX. However, Wrapped Bitcoin is 1.01 times less risky than BIX. It trades about 0.26 of its potential returns per unit of risk. BIX is currently generating about 0.25 per unit of risk. If you would invest  5,741,286  in Wrapped Bitcoin on September 1, 2024 and sell it today you would earn a total of  3,932,419  from holding Wrapped Bitcoin or generate 68.49% return on investment over 90 days.

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

Wrapped Bitcoin  vs.  BIX

Wrapped Bitcoin

Risk-Adjusted Performance

20 of 100

Solid

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

BIX

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Wrapped Bitcoin and BIX

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

The idea behind Wrapped Bitcoin and BIX 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.