What is the correlation between bitcoin and gold? How does the bitcoin and gold chart comparison look like? In this article, I would use python to plot out everything about these two assets. After which, I would draw out an efficient frontier graph and pinpoint the Sharpe ratio for portfolio optimization.
To start off, suppose you have $10,000. You are interested in getting some gold and bitcoin to diversify your portfolio against political uncertainty and recession. How would you allocate the money? Would it be like a 50-50 ratio? 20% bitcoin and 80% gold? Or 75% bitcoin and 25% gold? The question is pretty subjective, isn’t it? It is hard to decide on the allocation.
Introduction of Sharpe Ratio Source: https://www.ig.com/sg/trading-strategies/the-sharpe-ratio-explained-190117
What if there is a quantitative approach to help us make this decision? Yes, there is and it is called the Sharpe ratio. Sharpe ratio is otherwise