Correlation Between Marathon Digital and MicroStrategy Incorporated

Can any of the company-specific risk be diversified away by investing in both Marathon Digital and MicroStrategy Incorporated 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 MicroStrategy Incorporated 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 MicroStrategy Incorporated, you can compare the effects of market volatilities on Marathon Digital and MicroStrategy Incorporated 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 MicroStrategy Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Digital and MicroStrategy Incorporated.

Diversification Opportunities for Marathon Digital and MicroStrategy Incorporated

0.87

Correlation Coefficient

Marathon Digital  MicroStrategy Incorporated

Very poor diversification

The 3 months correlation between Marathon and MicroStrategy is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Digital Holdings and MicroStrategy Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MicroStrategy Incorporated 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 MicroStrategy Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MicroStrategy Incorporated has no effect on the direction of Marathon Digital i.e., Marathon Digital and MicroStrategy Incorporated go up and down completely randomly.

Pair Corralation between Marathon Digital and MicroStrategy Incorporated

Given the investment horizon of 90 days Marathon Digital Holdings is expected to under-perform the MicroStrategy Incorporated. But the stock apears to be less risky and, when comparing its historical volatility, Marathon Digital Holdings is 1.17 times less risky than MicroStrategy Incorporated. The stock trades about -0.13 of its potential returns per unit of risk. The MicroStrategy Incorporated is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  35,818  in MicroStrategy Incorporated on December 24, 2024 and sell it today you would lose (5,418) from holding MicroStrategy Incorporated or give up 15.13% of portfolio value over 90 days.

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

Marathon Digital Holdings  vs.  MicroStrategy Incorporated

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.

MicroStrategy Incorporated

Risk-Adjusted Performance

Very Weak

Over the last 90 days MicroStrategy Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Marathon Digital and MicroStrategy Incorporated

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

The idea behind Marathon Digital Holdings and MicroStrategy Incorporated 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.