Correlation Between BTM and ZCash
Can any of the company-specific risk be diversified away by investing in both BTM and ZCash 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 BTM and ZCash into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BTM and ZCash, you can compare the effects of market volatilities on BTM and ZCash 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 BTM with a short position of ZCash. Check out your portfolio center. Please also check ongoing floating volatility patterns of BTM and ZCash.
Diversification Opportunities for BTM and ZCash
Very poor diversification
The 3 months correlation between BTM and ZCash is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BTM and ZCash in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZCash and BTM 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 BTM are associated (or correlated) with ZCash. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZCash has no effect on the direction of BTM i.e., BTM and ZCash go up and down completely randomly.
Pair Corralation between BTM and ZCash
Assuming the 90 days trading horizon BTM is expected to under-perform the ZCash. In addition to that, BTM is 1.25 times more volatile than ZCash. It trades about -0.04 of its total potential returns per unit of risk. ZCash is currently generating about -0.02 per unit of volatility. If you would invest 4,428 in ZCash on January 24, 2024 and sell it today you would lose (2,037) from holding ZCash or give up 46.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
BTM vs. ZCash
Performance |
| Timeline |
| BTM |
| ZCash |
BTM and ZCash Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BTM and ZCash
The main advantage of trading using opposite BTM and ZCash positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BTM position performs unexpectedly, ZCash 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 ZCash will offset losses from the drop in ZCash's long position.The idea behind BTM and ZCash 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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