Correlation Between Wrapped Bitcoin and Arbitrum

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

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

Diversification Opportunities for Wrapped Bitcoin and Arbitrum

0.79

Correlation Coefficient

Wrapped Bitcoin  Arbitrum

Poor diversification

The 3 months correlation between Wrapped and Arbitrum is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and Arbitrum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arbitrum and Wrapped 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 Wrapped Bitcoin are associated (or correlated) with Arbitrum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arbitrum has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and Arbitrum go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and Arbitrum

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to under-perform the Arbitrum. But the crypto coin apears to be less risky and, when comparing its historical volatility, Wrapped Bitcoin is 3.51 times less risky than Arbitrum. The crypto coin trades about -0.04 of its potential returns per unit of risk. The Arbitrum is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  42.00  in Arbitrum on May 28, 2025 and sell it today you would earn a total of  19.00  from holding Arbitrum or generate 45.24% return on investment over 90 days.

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

Wrapped Bitcoin  vs.  Arbitrum

Wrapped Bitcoin

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Wrapped Bitcoin are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Wrapped Bitcoin may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Arbitrum

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Arbitrum are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Arbitrum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wrapped Bitcoin and Arbitrum

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

The idea behind Wrapped Bitcoin and Arbitrum 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.