Correlation Between Solana and Wrapped Bitcoin

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Can any of the company-specific risk be diversified away by investing in both Solana and Wrapped Bitcoin 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 Solana and Wrapped Bitcoin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Solana and Wrapped Bitcoin, you can compare the effects of market volatilities on Solana and Wrapped Bitcoin 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 Solana with a short position of Wrapped Bitcoin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Solana and Wrapped Bitcoin.

Diversification Opportunities for Solana and Wrapped Bitcoin

0.65
  Correlation Coefficient

Poor diversification

The 3 months correlation between Solana and Wrapped is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Solana and Wrapped Bitcoin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wrapped Bitcoin and Solana 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 Solana are associated (or correlated) with Wrapped Bitcoin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wrapped Bitcoin has no effect on the direction of Solana i.e., Solana and Wrapped Bitcoin go up and down completely randomly.

Pair Corralation between Solana and Wrapped Bitcoin

Assuming the 90 days trading horizon Solana is expected to generate 1.94 times more return on investment than Wrapped Bitcoin. However, Solana is 1.94 times more volatile than Wrapped Bitcoin. It trades about 0.06 of its potential returns per unit of risk. Wrapped Bitcoin is currently generating about 0.09 per unit of risk. If you would invest  4,488  in Solana on May 17, 2022 and sell it today you would earn a total of  172.00  from holding Solana or generate 3.83% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Solana  vs.  Wrapped Bitcoin

 Performance (%) 
       Timeline  
Solana 
Solana Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Solana are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Solana may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Solana Price Channel

Wrapped Bitcoin 
Wrapped Performance
0 of 100
Over the last 90 days Wrapped Bitcoin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Crypto's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for Wrapped Bitcoin investors.

Wrapped Price Channel

Solana and Wrapped Bitcoin Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Solana and Wrapped Bitcoin

The main advantage of trading using opposite Solana and Wrapped Bitcoin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solana position performs unexpectedly, Wrapped Bitcoin 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 Wrapped Bitcoin will offset losses from the drop in Wrapped Bitcoin's long position.
The idea behind Solana and Wrapped Bitcoin 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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