Can any of the company-specific risk be diversified away by investing in both Stronghold Digital and Terawulf 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 Terawulf 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 Terawulf, you can compare the effects of market volatilities on Stronghold Digital and Terawulf 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 Terawulf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Stronghold Digital and Terawulf.
Diversification Opportunities for Stronghold Digital and Terawulf
The 3 months correlation between Stronghold and Terawulf is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Stronghold Digital Mining and Terawulf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terawulf 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 Terawulf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terawulf has no effect on the direction of Stronghold Digital i.e., Stronghold Digital and Terawulf go up and down completely randomly.
Pair Corralation between Stronghold Digital and Terawulf
Given the investment horizon of 90 days Stronghold Digital Mining is expected to under-perform the Terawulf. But the stock apears to be less risky and, when comparing its historical volatility, Stronghold Digital Mining is 1.02 times less risky than Terawulf. The stock trades about 0.0 of its potential returns per unit of risk. The Terawulf is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 200.00 in Terawulf on March 6, 2024 and sell it today you would earn a total of 5.00 from holding Terawulf or generate 2.5% return on investment over 90 days.
Over the last 90 days Stronghold Digital Mining 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 forward indicators remain nearly stable which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
Compared to the overall equity markets, risk-adjusted returns on investments in Terawulf are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating essential indicators, Terawulf reported solid returns over the last few months and may actually be approaching a breakup point.