Correlation Between Bitfarms and Terawulf

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

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

Diversification Opportunities for Bitfarms and Terawulf

0.94

Correlation Coefficient

Bitfarms  Terawulf

Almost no diversification

The 3 months correlation between Bitfarms and Terawulf is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Bitfarms and Terawulf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terawulf 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 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 Bitfarms i.e., Bitfarms and Terawulf go up and down completely randomly.

Pair Corralation between Bitfarms and Terawulf

Given the investment horizon of 90 days Bitfarms is expected to under-perform the Terawulf. But the stock apears to be less risky and, when comparing its historical volatility, Bitfarms is 1.58 times less risky than Terawulf. The stock trades about -0.13 of its potential returns per unit of risk. The Terawulf is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  738.00  in Terawulf on November 19, 2024 and sell it today you would lose (251.00) from holding Terawulf or give up 34.01% 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.  Terawulf

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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Terawulf

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Bitfarms and Terawulf

The main advantage of trading using opposite Bitfarms and Terawulf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bitfarms 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 Bitfarms 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.