Correlation Between Bitfarms and Netcapital

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

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

Diversification Opportunities for Bitfarms and Netcapital

-0.05

Correlation Coefficient

Bitfarms  Netcapital

Good diversification

The 3 months correlation between Bitfarms and Netcapital is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bitfarms and Netcapital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Netcapital 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 Netcapital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Netcapital has no effect on the direction of Bitfarms i.e., Bitfarms and Netcapital go up and down completely randomly.

Pair Corralation between Bitfarms and Netcapital

Given the investment horizon of 90 days Bitfarms is expected to generate 0.92 times more return on investment than Netcapital. However, Bitfarms is 1.09 times less risky than Netcapital. It trades about 0.04 of its potential returns per unit of risk. Netcapital is currently generating about -0.04 per unit of risk. If you would invest  191.00  in Bitfarms on September 5, 2024 and sell it today you would earn a total of  8.00  from holding Bitfarms or generate 4.19% return on investment over 90 days.

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

Bitfarms  vs.  Netcapital

Bitfarms

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Bitfarms are ranked lower than 3 (%) 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.

Netcapital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Netcapital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Bitfarms and Netcapital

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

The idea behind Bitfarms and Netcapital 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.