Correlation Between Valkyrie Bitcoin and Stronghold Digital

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

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

Diversification Opportunities for Valkyrie Bitcoin and Stronghold Digital

0.66

Correlation Coefficient

Valkyrie Bitcoin  Stronghold Digital

Poor diversification

The 3 months correlation between Valkyrie and Stronghold is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Valkyrie Bitcoin Strategy and Stronghold Digital Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stronghold Digital Mining and Valkyrie Bitcoin 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 Valkyrie Bitcoin Strategy are associated (or correlated) with Stronghold Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stronghold Digital Mining has no effect on the direction of Valkyrie Bitcoin i.e., Valkyrie Bitcoin and Stronghold Digital go up and down completely randomly.

Pair Corralation between Valkyrie Bitcoin and Stronghold Digital

Considering the 90-day investment horizon Valkyrie Bitcoin Strategy is expected to generate 0.56 times more return on investment than Stronghold Digital. However, Valkyrie Bitcoin Strategy is 1.8 times less risky than Stronghold Digital. It trades about 0.2 of its potential returns per unit of risk. Stronghold Digital Mining is currently generating about 0.05 per unit of risk. If you would invest  1,554  in Valkyrie Bitcoin Strategy on August 30, 2024 and sell it today you would earn a total of  810.00  from holding Valkyrie Bitcoin Strategy or generate 52.12% return on investment over 90 days.

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

Valkyrie Bitcoin Strategy  vs.  Stronghold Digital Mining

Valkyrie Bitcoin Strategy

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Valkyrie Bitcoin Strategy are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Valkyrie Bitcoin reported solid returns over the last few months and may actually be approaching a breakup point.

Stronghold Digital Mining

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Stronghold Digital Mining are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward indicators, Stronghold Digital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Valkyrie Bitcoin and Stronghold Digital

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

The idea behind Valkyrie Bitcoin Strategy and Stronghold Digital Mining 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.