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

0.94

Correlation Coefficient

Bitfarms  Marathon Digital

Almost no diversification

The 3 months correlation between Bitfarms and Marathon is 0.94. 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 under-perform the Marathon Digital. But the stock apears to be less risky and, when comparing its historical volatility, Bitfarms is 1.11 times less risky than Marathon Digital. The stock trades about -0.17 of its potential returns per unit of risk. The Marathon Digital Holdings is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,729  in Marathon Digital Holdings on December 30, 2024 and sell it today you would lose (482.00) from holding Marathon Digital Holdings or give up 27.88% of portfolio value over 90 days.

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

Bitfarms  vs.  Marathon Digital Holdings

Bitfarms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitfarms has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Marathon Digital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marathon Digital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.