Correlation Between Wrapped Bitcoin and FTX Token

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

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

Diversification Opportunities for Wrapped Bitcoin and FTX Token

0.49

Correlation Coefficient

Wrapped Bitcoin  FTX Token

Very weak diversification

The 3 months correlation between Wrapped and FTX is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and FTX Token in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FTX Token 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 FTX Token. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FTX Token has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and FTX Token go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and FTX Token

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 0.38 times more return on investment than FTX Token. However, Wrapped Bitcoin is 2.67 times less risky than FTX Token. It trades about 0.21 of its potential returns per unit of risk. FTX Token is currently generating about -0.19 per unit of risk. If you would invest  6,198,006  in Wrapped Bitcoin on August 6, 2024 and sell it today you would earn a total of  726,298  from holding Wrapped Bitcoin or generate 11.72% return on investment over 90 days.

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

Wrapped Bitcoin  vs.  FTX Token

Wrapped Bitcoin

Risk-Adjusted Performance

9 of 100

OK

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

FTX Token

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FTX Token are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, FTX Token exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wrapped Bitcoin and FTX Token

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

The idea behind Wrapped Bitcoin and FTX Token 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.