Correlation Between Alphabet and Bitfarms

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

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

Diversification Opportunities for Alphabet and Bitfarms

0.64

Correlation Coefficient

Alphabet  Bitfarms

Poor diversification

The 3 months correlation between Alphabet and Bitfarms is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Alphabet Inc CDR and Bitfarms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitfarms and Alphabet 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 Alphabet Inc CDR 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 Alphabet i.e., Alphabet and Bitfarms go up and down completely randomly.

Pair Corralation between Alphabet and Bitfarms

Assuming the 90 days trading horizon Alphabet is expected to generate 3.28 times less return on investment than Bitfarms. But when comparing it to its historical volatility, Alphabet Inc CDR is 3.82 times less risky than Bitfarms. It trades about 0.08 of its potential returns per unit of risk. Bitfarms is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  264.00  in Bitfarms on September 3, 2024 and sell it today you would earn a total of  46.00  from holding Bitfarms or generate 17.42% return on investment over 90 days.

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

Alphabet Inc CDR  vs.  Bitfarms

Alphabet CDR

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Alphabet Inc CDR are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Alphabet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bitfarms

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bitfarms are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Bitfarms displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alphabet and Bitfarms

The main advantage of trading using opposite Alphabet and Bitfarms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alphabet 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 Alphabet Inc CDR 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.