Correlation Between BTC Digital and Inspired Entertainment

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

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

Diversification Opportunities for BTC Digital and Inspired Entertainment

-0.27

Correlation Coefficient

BTC Digital  Inspired Entertainment

Very good diversification

The 3 months correlation between BTC and Inspired is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding BTC Digital and Inspired Entertainment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspired Entertainment and BTC 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 BTC Digital are associated (or correlated) with Inspired Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspired Entertainment has no effect on the direction of BTC Digital i.e., BTC Digital and Inspired Entertainment go up and down completely randomly.

Pair Corralation between BTC Digital and Inspired Entertainment

Assuming the 90 days horizon BTC Digital is expected to generate 10.87 times more return on investment than Inspired Entertainment. However, BTC Digital is 10.87 times more volatile than Inspired Entertainment. It trades about 0.14 of its potential returns per unit of risk. Inspired Entertainment is currently generating about 0.2 per unit of risk. If you would invest  2.20  in BTC Digital on August 14, 2024 and sell it today you would earn a total of  1.20  from holding BTC Digital or generate 54.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	73.02%
Values	Daily Returns

BTC Digital  vs.  Inspired Entertainment

BTC Digital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BTC Digital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, BTC Digital showed solid returns over the last few months and may actually be approaching a breakup point.

Inspired Entertainment

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Inspired Entertainment are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Inspired Entertainment exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BTC Digital and Inspired Entertainment

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

The idea behind BTC Digital and Inspired Entertainment 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.