Correlation Between Bitwise Crypto and Valkyrie Bitcoin

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

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

Diversification Opportunities for Bitwise Crypto and Valkyrie Bitcoin

0.71

Correlation Coefficient

Bitwise Crypto  Valkyrie Bitcoin

Poor diversification

The 3 months correlation between Bitwise and Valkyrie is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Bitwise Crypto Industry and Valkyrie Bitcoin Strategy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valkyrie Bitcoin Strategy and Bitwise Crypto 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 Bitwise Crypto Industry are associated (or correlated) with Valkyrie Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valkyrie Bitcoin Strategy has no effect on the direction of Bitwise Crypto i.e., Bitwise Crypto and Valkyrie Bitcoin go up and down completely randomly.

Pair Corralation between Bitwise Crypto and Valkyrie Bitcoin

Given the investment horizon of 90 days Bitwise Crypto is expected to generate 2.28 times less return on investment than Valkyrie Bitcoin. In addition to that, Bitwise Crypto is 1.16 times more volatile than Valkyrie Bitcoin Strategy. It trades about 0.1 of its total potential returns per unit of risk. Valkyrie Bitcoin Strategy is currently generating about 0.26 per unit of volatility. If you would invest  1,832  in Valkyrie Bitcoin Strategy on March 5, 2024 and sell it today you would earn a total of  294.00  from holding Valkyrie Bitcoin Strategy or generate 16.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Bitwise Crypto Industry  vs.  Valkyrie Bitcoin Strategy

Bitwise Crypto Industry

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bitwise Crypto Industry are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Bitwise Crypto reported solid returns over the last few months and may actually be approaching a breakup point.

Valkyrie Bitcoin Strategy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Valkyrie Bitcoin Strategy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Valkyrie Bitcoin may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Bitwise Crypto and Valkyrie Bitcoin

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

The idea behind Bitwise Crypto Industry and Valkyrie Bitcoin Strategy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.