Correlation Between Marathon Digital and Applied Blockchain

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

Diversification Opportunities for Marathon Digital and Applied Blockchain

0.73

Correlation Coefficient

Marathon Digital  Applied Blockchain

Poor diversification

The 3 months correlation between Marathon and Applied is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Digital Holdings and Applied Blockchain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Blockchain 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 Applied Blockchain. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Blockchain has no effect on the direction of Marathon Digital i.e., Marathon Digital and Applied Blockchain go up and down completely randomly.

Pair Corralation between Marathon Digital and Applied Blockchain

Given the investment horizon of 90 days Marathon Digital is expected to generate 2.06 times less return on investment than Applied Blockchain. In addition to that, Marathon Digital is 1.35 times more volatile than Applied Blockchain. It trades about 0.15 of its total potential returns per unit of risk. Applied Blockchain is currently generating about 0.42 per unit of volatility. If you would invest  271.00  in Applied Blockchain on February 22, 2024 and sell it today you would earn a total of  171.00  from holding Applied Blockchain or generate 63.1% 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.  Applied Blockchain

Marathon Digital Holdings

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Marathon Digital Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Marathon Digital is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Applied Blockchain

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Blockchain are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Applied Blockchain exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Marathon Digital and Applied Blockchain

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

The idea behind Marathon Digital Holdings and Applied Blockchain 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.