Correlation Between Stronghold Digital and CBOE Volatility

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

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

Diversification Opportunities for Stronghold Digital and CBOE Volatility

-0.59

Correlation Coefficient

Stronghold Digital  CBOE Volatility

Excellent diversification

The 3 months correlation between Stronghold and CBOE is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Stronghold Digital Mining and CBOE Volatility Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBOE Volatility Index and Stronghold 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 Stronghold Digital Mining are associated (or correlated) with CBOE Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBOE Volatility Index has no effect on the direction of Stronghold Digital i.e., Stronghold Digital and CBOE Volatility go up and down completely randomly.

Pair Corralation between Stronghold Digital and CBOE Volatility

Given the investment horizon of 90 days Stronghold Digital Mining is expected to generate 1.07 times more return on investment than CBOE Volatility. However, Stronghold Digital is 1.07 times more volatile than CBOE Volatility Index. It trades about 0.07 of its potential returns per unit of risk. CBOE Volatility Index is currently generating about -0.02 per unit of risk. If you would invest  431.00  in Stronghold Digital Mining on September 18, 2024 and sell it today you would earn a total of  76.00  from holding Stronghold Digital Mining or generate 17.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Stronghold Digital Mining  vs.  CBOE Volatility Index

Pair Trading with Stronghold Digital and CBOE Volatility

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

The idea behind Stronghold Digital Mining and CBOE Volatility Index 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.