Correlation Between Cipher Mining and Stronghold Digital

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

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

Diversification Opportunities for Cipher Mining and Stronghold Digital

0.67

Correlation Coefficient

Cipher Mining  Stronghold Digital

Poor diversification

The 3 months correlation between Cipher and Stronghold is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Cipher Mining 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 Cipher Mining 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 Cipher Mining 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 Cipher Mining i.e., Cipher Mining and Stronghold Digital go up and down completely randomly.

Pair Corralation between Cipher Mining and Stronghold Digital

Given the investment horizon of 90 days Cipher Mining is expected to generate 1.11 times more return on investment than Stronghold Digital. However, Cipher Mining is 1.11 times more volatile than Stronghold Digital Mining. It trades about 0.16 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  351.00  in Cipher Mining on August 30, 2024 and sell it today you would earn a total of  294.00  from holding Cipher Mining or generate 83.76% return on investment over 90 days.

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

Cipher Mining  vs.  Stronghold Digital Mining

Cipher Mining

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cipher Mining are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, Cipher Mining 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 Cipher Mining and Stronghold Digital

The main advantage of trading using opposite Cipher Mining and Stronghold Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cipher Mining 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 Cipher Mining 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.