Correlation Between Marathon Digital and DeFi Technologies

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

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

Diversification Opportunities for Marathon Digital and DeFi Technologies

0.71

Correlation Coefficient

Marathon Digital  DeFi Technologies

Poor diversification

The 3 months correlation between Marathon and DeFi is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Digital Holdings and DeFi Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DeFi Technologies and Marathon 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 Marathon Digital Holdings are associated (or correlated) with DeFi Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DeFi Technologies has no effect on the direction of Marathon Digital i.e., Marathon Digital and DeFi Technologies go up and down completely randomly.

Pair Corralation between Marathon Digital and DeFi Technologies

Given the investment horizon of 90 days Marathon Digital Holdings is expected to under-perform the DeFi Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Marathon Digital Holdings is 1.32 times less risky than DeFi Technologies. The stock trades about -0.13 of its potential returns per unit of risk. The DeFi Technologies is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  279.00  in DeFi Technologies on December 20, 2024 and sell it today you would earn a total of  18.00  from holding DeFi Technologies or generate 6.45% return on investment over 90 days.

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

Marathon Digital Holdings  vs.  DeFi Technologies

Marathon Digital Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Marathon Digital Holdings 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

DeFi Technologies

Risk-Adjusted Performance

Insignificant

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

Pair Trading with Marathon Digital and DeFi Technologies

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

The idea behind Marathon Digital Holdings and DeFi Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.