Correlation Between Terawulf and Bitfarms

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

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

Diversification Opportunities for Terawulf and Bitfarms

-0.01

Correlation Coefficient

Terawulf  Bitfarms

Good diversification

The 3 months correlation between Terawulf and Bitfarms is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Terawulf and Bitfarms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitfarms and Terawulf 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 Terawulf 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 Terawulf i.e., Terawulf and Bitfarms go up and down completely randomly.

Pair Corralation between Terawulf and Bitfarms

Given the investment horizon of 90 days Terawulf is expected to generate 1.21 times more return on investment than Bitfarms. However, Terawulf is 1.21 times more volatile than Bitfarms. It trades about 0.22 of its potential returns per unit of risk. Bitfarms is currently generating about 0.01 per unit of risk. If you would invest  373.00  in Terawulf on August 7, 2024 and sell it today you would earn a total of  225.00  from holding Terawulf or generate 60.32% return on investment over 90 days.

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

Terawulf  vs.  Bitfarms

Terawulf

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Terawulf are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Terawulf reported solid returns over the last few months and may actually be approaching a breakup point.

Bitfarms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bitfarms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bitfarms is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Terawulf and Bitfarms

The main advantage of trading using opposite Terawulf and Bitfarms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terawulf 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 Terawulf 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.

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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.