Correlation Between Bit Digital and Xp

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

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

Diversification Opportunities for Bit Digital and Xp

-0.58

Correlation Coefficient

Bit Digital  Xp

Excellent diversification

The 3 months correlation between Bit and Xp is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Bit Digital and Xp Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xp Inc and Bit Digital 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 Bit Digital are associated (or correlated) with Xp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xp Inc has no effect on the direction of Bit Digital i.e., Bit Digital and Xp go up and down completely randomly.

Pair Corralation between Bit Digital and Xp

Given the investment horizon of 90 days Bit Digital is expected to under-perform the Xp. In addition to that, Bit Digital is 1.78 times more volatile than Xp Inc. It trades about -0.16 of its total potential returns per unit of risk. Xp Inc is currently generating about 0.08 per unit of volatility. If you would invest  1,155  in Xp Inc on January 11, 2025 and sell it today you would earn a total of  137.00  from holding Xp Inc or generate 11.86% return on investment over 90 days.

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

Bit Digital  vs.  Xp Inc

Bit Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bit Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Xp Inc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xp Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Xp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bit Digital and Xp

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

The idea behind Bit Digital and Xp Inc 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.