Correlation Between Stronghold Digital and Marathon Digital

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

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

Diversification Opportunities for Stronghold Digital and Marathon Digital

0.96

Correlation Coefficient

Stronghold Digital  Marathon Digital

Almost no diversification

The 3 months correlation between Stronghold and Marathon is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Stronghold Digital Mining 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 Stronghold 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 Stronghold Digital Mining 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 Stronghold Digital i.e., Stronghold Digital and Marathon Digital go up and down completely randomly.

Pair Corralation between Stronghold Digital and Marathon Digital

Given the investment horizon of 90 days Stronghold Digital Mining is expected to generate 1.05 times more return on investment than Marathon Digital. However, Stronghold Digital is 1.05 times more volatile than Marathon Digital Holdings. It trades about -0.18 of its potential returns per unit of risk. Marathon Digital Holdings is currently generating about -0.25 per unit of risk. If you would invest  520.00  in Stronghold Digital Mining on November 28, 2024 and sell it today you would lose (244.00) from holding Stronghold Digital Mining or give up 46.92% of portfolio value over 90 days.

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

Stronghold Digital Mining  vs.  Marathon Digital Holdings

Stronghold Digital Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stronghold Digital Mining has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Stronghold Digital and Marathon Digital

The main advantage of trading using opposite Stronghold Digital and Marathon Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stronghold Digital 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 Stronghold Digital Mining 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.