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Portfolios Optimize Better with BNB, Says Report by 21Shares and Binance Research

2020-04-08

According to a new report from Binance Research and 21Shares, multi-asset portfolios with BNB outperform comparable portfolios without cryptocurrencies.

Binance Research, the market research and analysis arm of Binance, released a recent report in collaboration with 21Shares, which studied various combinations of asset portfolios, including BNB and BTC. Results have shown that portfolios with cryptocurrencies such as BNB and BTC outperform comparable portfolios without cryptocurrencies. In addition, over the study period, portfolios containing BNB performed better overall compared with portfolios containing a combination of BTC and BNB.

In the recently released report titled “Portfolio Optimization with BNB,” Binance Research and 21Shares analyzed the performance of traditional US equity + fixed-income portfolios, (1) without crypto, (2) with BNB, and (3) with BNB & BTC. Different rebalancing techniques were also used in this study. In addition, the report looked into the correlation of BNB with BTC and other crypto assets.

“Unlike other cryptocurrencies, BNB displayed positively skewed daily returns, which may be useful for investors to manage downside tail risk better, especially in a portfolio composed of negatively skewed assets,” the report noted.

In the bigger picture, the inclusion of crypto assets to traditionally diversified portfolios drastically improved the risk-return characteristics of these portfolios, as measured by their higher Sharpe ratios, due to their low correlations with other financial assets. “Like Bitcoin, BNB displayed in the long-term a null correlation with all traditional financial assets like equities and commodities.” according to the report. 

But even with that context, BNB has exhibited a lower than average correlation with other large-cap cryptocurrencies like BTC and ETH.

Tolerance-based rebalancing allows investors to limit their exposure to crypto assets, while a monthly rebalancing sometimes leads to significant deviations from a portfolio’s target exposure to cryptos (e.g., during the January 2018’s bull run), Binance Research noted.

Read the full report here.