Correlation Between Bit Digital and Bitfarms

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

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

Diversification Opportunities for Bit Digital and Bitfarms

0.92

Correlation Coefficient

Bit Digital  Bitfarms

Almost no diversification

The 3 months correlation between Bit and Bitfarms is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Bit Digital and Bitfarms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitfarms and Bit 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 Bit Digital are associated (or correlated) with Bitfarms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitfarms has no effect on the direction of Bit Digital i.e., Bit Digital and Bitfarms go up and down completely randomly.

Pair Corralation between Bit Digital and Bitfarms

Given the investment horizon of 90 days Bit Digital is expected to generate 1.14 times more return on investment than Bitfarms. However, Bit Digital is 1.14 times more volatile than Bitfarms. It trades about -0.07 of its potential returns per unit of risk. Bitfarms is currently generating about -0.17 per unit of risk. If you would invest  300.00  in Bit Digital on December 28, 2024 and sell it today you would lose (88.00) from holding Bit Digital or give up 29.33% of portfolio value over 90 days.

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

Bit Digital  vs.  Bitfarms

Bit Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bit Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

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.

Pair Trading with Bit Digital and Bitfarms

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

The idea behind Bit Digital and Bitfarms 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.