Correlation Between Galaxy Digital and Iris Energy

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

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

Diversification Opportunities for Galaxy Digital and Iris Energy

0.84

Correlation Coefficient

Galaxy Digital  Iris Energy

Very poor diversification

The 3 months correlation between Galaxy and Iris is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Galaxy Digital Holdings and Iris Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iris Energy and Galaxy 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 Galaxy Digital Holdings are associated (or correlated) with Iris Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iris Energy has no effect on the direction of Galaxy Digital i.e., Galaxy Digital and Iris Energy go up and down completely randomly.

Pair Corralation between Galaxy Digital and Iris Energy

Assuming the 90 days horizon Galaxy Digital is expected to generate 1.21 times less return on investment than Iris Energy. But when comparing it to its historical volatility, Galaxy Digital Holdings is 1.35 times less risky than Iris Energy. It trades about 0.17 of its potential returns per unit of risk. Iris Energy is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  756.00  in Iris Energy on September 13, 2024 and sell it today you would earn a total of  605.00  from holding Iris Energy or generate 80.03% return on investment over 90 days.

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

Galaxy Digital Holdings  vs.  Iris Energy

Galaxy Digital Holdings

Risk-Adjusted Performance

13 of 100

Good

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

Iris Energy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Iris Energy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Iris Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galaxy Digital and Iris Energy

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

The idea behind Galaxy Digital Holdings and Iris Energy 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.