Correlation Between Bitcoin and DATA

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

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

Diversification Opportunities for Bitcoin and DATA

0.73

Correlation Coefficient

Bitcoin  DATA

Poor diversification

The 3 months correlation between Bitcoin and DATA is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and DATA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATA and 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 Bitcoin are associated (or correlated) with DATA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATA has no effect on the direction of Bitcoin i.e., Bitcoin and DATA go up and down completely randomly.

Pair Corralation between Bitcoin and DATA

Assuming the 90 days trading horizon Bitcoin is expected to generate 0.46 times more return on investment than DATA. However, Bitcoin is 2.15 times less risky than DATA. It trades about -0.12 of its potential returns per unit of risk. DATA is currently generating about -0.31 per unit of risk. If you would invest  9,471,029  in Bitcoin on January 9, 2025 and sell it today you would lose (1,832,786) from holding Bitcoin or give up 19.35% of portfolio value over 90 days.

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

Bitcoin  vs.  DATA

Bitcoin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for Bitcoin shareholders.

DATA

Risk-Adjusted Performance

Very Weak

Over the last 90 days DATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for DATA shareholders.

Pair Trading with Bitcoin and DATA

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

The idea behind Bitcoin and DATA 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.