Correlation Between Wrapped Bitcoin and Livepeer

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

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

Diversification Opportunities for Wrapped Bitcoin and Livepeer

0.37

Correlation Coefficient

Wrapped Bitcoin  Livepeer

Weak diversification

The 3 months correlation between Wrapped and Livepeer is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Wrapped Bitcoin and Livepeer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Livepeer 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 Livepeer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Livepeer has no effect on the direction of Wrapped Bitcoin i.e., Wrapped Bitcoin and Livepeer go up and down completely randomly.

Pair Corralation between Wrapped Bitcoin and Livepeer

Assuming the 90 days trading horizon Wrapped Bitcoin is expected to generate 0.4 times more return on investment than Livepeer. However, Wrapped Bitcoin is 2.5 times less risky than Livepeer. It trades about 0.12 of its potential returns per unit of risk. Livepeer is currently generating about 0.01 per unit of risk. If you would invest  8,706,346  in Wrapped Bitcoin on March 1, 2025 and sell it today you would earn a total of  1,898,954  from holding Wrapped Bitcoin or generate 21.81% return on investment over 90 days.

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

Wrapped Bitcoin  vs.  Livepeer

Wrapped Bitcoin

Risk-Adjusted Performance

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.

Livepeer

Risk-Adjusted Performance

Very Weak

Over the last 90 days Livepeer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Livepeer is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Wrapped Bitcoin and Livepeer

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

The idea behind Wrapped Bitcoin and Livepeer 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.