Correlation Between CleanSpark and Applied Digital

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

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

Diversification Opportunities for CleanSpark and Applied Digital

0.57

Correlation Coefficient

CleanSpark  Applied Digital

Very weak diversification

The 3 months correlation between CleanSpark and Applied is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding CleanSpark and Applied Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Digital and CleanSpark 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 CleanSpark are associated (or correlated) with Applied Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Digital has no effect on the direction of CleanSpark i.e., CleanSpark and Applied Digital go up and down completely randomly.

Pair Corralation between CleanSpark and Applied Digital

Given the investment horizon of 90 days CleanSpark is expected to under-perform the Applied Digital. But the stock apears to be less risky and, when comparing its historical volatility, CleanSpark is 1.44 times less risky than Applied Digital. The stock trades about -0.17 of its potential returns per unit of risk. The Applied Digital is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  962.00  in Applied Digital on December 1, 2024 and sell it today you would lose (162.00) from holding Applied Digital or give up 16.84% of portfolio value over 90 days.

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

CleanSpark  vs.  Applied Digital

CleanSpark

Risk-Adjusted Performance

Very Weak

Over the last 90 days CleanSpark 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 quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Applied Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, Applied Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with CleanSpark and Applied Digital

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

The idea behind CleanSpark and Applied Digital 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.