Correlation Between Bitfarms and Marathon Digital

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

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

Diversification Opportunities for Bitfarms and Marathon Digital

0.57

Correlation Coefficient

Bitfarms  Marathon Digital

Very weak diversification

The 3 months correlation between Bitfarms and Marathon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Bitfarms and Marathon Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Digital Holdings and Bitfarms 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 Bitfarms are associated (or correlated) with Marathon Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Digital Holdings has no effect on the direction of Bitfarms i.e., Bitfarms and Marathon Digital go up and down completely randomly.

Pair Corralation between Bitfarms and Marathon Digital

Given the investment horizon of 90 days Bitfarms is expected to generate 3.6 times less return on investment than Marathon Digital. But when comparing it to its historical volatility, Bitfarms is 1.15 times less risky than Marathon Digital. It trades about 0.05 of its potential returns per unit of risk. Marathon Digital Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,526  in Marathon Digital Holdings on September 2, 2024 and sell it today you would earn a total of  1,216  from holding Marathon Digital Holdings or generate 79.69% return on investment over 90 days.

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

Bitfarms  vs.  Marathon Digital Holdings

Bitfarms

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bitfarms are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal basic indicators, Bitfarms reported solid returns over the last few months and may actually be approaching a breakup point.

Marathon Digital Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Digital Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Marathon Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bitfarms and Marathon Digital

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

The idea behind Bitfarms and Marathon Digital Holdings 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.