Correlation Between Marathon Digital and Bitfarms

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

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

Diversification Opportunities for Marathon Digital and Bitfarms

0.71

Correlation Coefficient

Marathon Digital  Bitfarms

Poor diversification

The 3 months correlation between Marathon and Bitfarms is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Digital Holdings and Bitfarms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitfarms and Marathon 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 Marathon Digital Holdings are associated (or correlated) with Bitfarms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitfarms has no effect on the direction of Marathon Digital i.e., Marathon Digital and Bitfarms go up and down completely randomly.

Pair Corralation between Marathon Digital and Bitfarms

Given the investment horizon of 90 days Marathon Digital Holdings is expected to generate 1.1 times more return on investment than Bitfarms. However, Marathon Digital is 1.1 times more volatile than Bitfarms. It trades about 0.07 of its potential returns per unit of risk. Bitfarms is currently generating about 0.07 per unit of risk. If you would invest  621.00  in Marathon Digital Holdings on August 22, 2024 and sell it today you would earn a total of  1,365  from holding Marathon Digital Holdings or generate 219.81% return on investment over 90 days.

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

Marathon Digital Holdings  vs.  Bitfarms

Marathon Digital Holdings

Risk-Adjusted Performance

5 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Digital Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Marathon Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Bitfarms

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bitfarms are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Bitfarms may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Marathon Digital and Bitfarms

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

The idea behind Marathon Digital Holdings and Bitfarms 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.