Correlation Between Galaxy Digital and Terawulf

Can any of the company-specific risk be diversified away by investing in both Galaxy Digital and Terawulf 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 Terawulf 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 Terawulf, you can compare the effects of market volatilities on Galaxy Digital and Terawulf 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 Terawulf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Galaxy Digital and Terawulf.

Diversification Opportunities for Galaxy Digital and Terawulf

0.81

Correlation Coefficient

Galaxy Digital  Terawulf

Very poor diversification

The 3 months correlation between Galaxy and Terawulf is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Galaxy Digital Holdings and Terawulf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terawulf 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 Terawulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terawulf has no effect on the direction of Galaxy Digital i.e., Galaxy Digital and Terawulf go up and down completely randomly.

Pair Corralation between Galaxy Digital and Terawulf

Assuming the 90 days horizon Galaxy Digital Holdings is expected to generate 0.96 times more return on investment than Terawulf. However, Galaxy Digital Holdings is 1.04 times less risky than Terawulf. It trades about 0.3 of its potential returns per unit of risk. Terawulf is currently generating about 0.15 per unit of risk. If you would invest  1,165  in Galaxy Digital Holdings on September 5, 2024 and sell it today you would earn a total of  605.00  from holding Galaxy Digital Holdings or generate 51.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Galaxy Digital Holdings  vs.  Terawulf

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.

Terawulf

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Terawulf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal essential indicators, Terawulf reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Galaxy Digital and Terawulf

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

The idea behind Galaxy Digital Holdings and Terawulf 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.