Correlation Between Bitcoin and MTH

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

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

Diversification Opportunities for Bitcoin and MTH

-0.44

Correlation Coefficient

Bitcoin  MTH

Very good diversification

The 3 months correlation between Bitcoin and MTH is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bitcoin and MTH in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MTH 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 MTH. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MTH has no effect on the direction of Bitcoin i.e., Bitcoin and MTH go up and down completely randomly.

Pair Corralation between Bitcoin and MTH

Assuming the 90 days trading horizon Bitcoin is expected to under-perform the MTH. But the crypto coin apears to be less risky and, when comparing its historical volatility, Bitcoin is 11.41 times less risky than MTH. The crypto coin trades about -0.09 of its potential returns per unit of risk. The MTH is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.04  in MTH on January 4, 2025 and sell it today you would lose  0.00  from holding MTH or give up 2.5% of portfolio value over 90 days.

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

Bitcoin  vs.  MTH

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.

MTH

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MTH are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical indicators, MTH exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitcoin and MTH

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

The idea behind Bitcoin and MTH 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.