Correlation Between Applied Digital and Riot Blockchain

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

By analyzing existing cross correlation between Applied Digital and Riot Blockchain, you can compare the effects of market volatilities on Applied Digital and Riot Blockchain 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 Applied Digital with a short position of Riot Blockchain. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Digital and Riot Blockchain.

Diversification Opportunities for Applied Digital and Riot Blockchain

0.72

Correlation Coefficient

Applied Digital  Riot Blockchain

Poor diversification

The 3 months correlation between Applied and Riot is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Applied Digital and Riot Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riot Blockchain and Applied Digital 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 Applied Digital are associated (or correlated) with Riot Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riot Blockchain has no effect on the direction of Applied Digital i.e., Applied Digital and Riot Blockchain go up and down completely randomly.

Pair Corralation between Applied Digital and Riot Blockchain

Given the investment horizon of 90 days Applied Digital is expected to generate 1.42 times more return on investment than Riot Blockchain. However, Applied Digital is 1.42 times more volatile than Riot Blockchain. It trades about 0.21 of its potential returns per unit of risk. Riot Blockchain is currently generating about 0.18 per unit of risk. If you would invest  1,007  in Applied Digital on June 30, 2025 and sell it today you would earn a total of  1,164  from holding Applied Digital or generate 115.59% return on investment over 90 days.

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

Applied Digital  vs.  Riot Blockchain

Applied Digital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Digital are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting essential indicators, Applied Digital exhibited solid returns over the last few months and may actually be approaching a breakup point.

Riot Blockchain

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Riot Blockchain are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Riot Blockchain unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Digital and Riot Blockchain

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

The idea behind Applied Digital and Riot Blockchain 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.