Correlation Between MicroStrategy Incorporated and Marathon Digital

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

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

Diversification Opportunities for MicroStrategy Incorporated and Marathon Digital

0.67

Correlation Coefficient

MicroStrategy Incorporated  Marathon Digital

Poor diversification

The 3 months correlation between MicroStrategy and Marathon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MicroStrategy Incorporated and Marathon Digital Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Digital Holdings and MicroStrategy Incorporated 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 MicroStrategy Incorporated are associated (or correlated) with Marathon Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Digital Holdings has no effect on the direction of MicroStrategy Incorporated i.e., MicroStrategy Incorporated and Marathon Digital go up and down completely randomly.

Pair Corralation between MicroStrategy Incorporated and Marathon Digital

Given the investment horizon of 90 days MicroStrategy Incorporated is expected to generate 1.01 times more return on investment than Marathon Digital. However, MicroStrategy Incorporated is 1.01 times more volatile than Marathon Digital Holdings. It trades about 0.14 of its potential returns per unit of risk. Marathon Digital Holdings is currently generating about 0.07 per unit of risk. If you would invest  23,434  in MicroStrategy Incorporated on October 25, 2024 and sell it today you would earn a total of  14,297  from holding MicroStrategy Incorporated or generate 61.01% return on investment over 90 days.

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

MicroStrategy Incorporated  vs.  Marathon Digital Holdings

MicroStrategy Incorporated

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MicroStrategy Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, MicroStrategy Incorporated reported solid returns over the last few months and may actually be approaching a breakup point.

Marathon Digital Holdings

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Digital Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Marathon Digital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MicroStrategy Incorporated and Marathon Digital

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

The idea behind MicroStrategy Incorporated and Marathon Digital Holdings 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.