Correlation Between Binance Coin and Bitcoin
Can any of the company-specific risk be diversified away by investing in both Binance Coin and 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 Binance Coin and Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Binance Coin and Bitcoin, you can compare the effects of market volatilities on Binance Coin and 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 Binance Coin with a short position of Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Binance Coin and Bitcoin.
Diversification Opportunities for Binance Coin and Bitcoin
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Binance and Bitcoin is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Binance Coin and Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitcoin and Binance Coin 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 Binance Coin are associated (or correlated) with Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitcoin has no effect on the direction of Binance Coin i.e., Binance Coin and Bitcoin go up and down completely randomly.
Pair Corralation between Binance Coin and Bitcoin
Assuming the 90 days trading horizon Binance Coin is expected to generate 1.29 times more return on investment than Bitcoin. However, Binance Coin is 1.29 times more volatile than Bitcoin. It trades about 0.09 of its potential returns per unit of risk. Bitcoin is currently generating about -0.06 per unit of risk. If you would invest 57,401 in Binance Coin on January 26, 2024 and sell it today you would earn a total of 3,219 from holding Binance Coin or generate 5.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Binance Coin vs. Bitcoin
Performance |
| Timeline |
| Binance Coin |
| Bitcoin |
Binance Coin and Bitcoin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Binance Coin and Bitcoin
The main advantage of trading using opposite Binance Coin and Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Binance Coin position performs unexpectedly, 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 Bitcoin will offset losses from the drop in Bitcoin's long position.| Binance Coin vs. Staked Ether | Binance Coin vs. Cronos | Binance Coin vs. Wrapped Bitcoin | Binance Coin vs. Monero |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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