Correlation Between Terawulf and Marathon Digital

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

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

Diversification Opportunities for Terawulf and Marathon Digital

0.03

Correlation Coefficient

Terawulf  Marathon Digital

Significant diversification

The 3 months correlation between Terawulf and Marathon is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Terawulf 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 Terawulf 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 Terawulf 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 Terawulf i.e., Terawulf and Marathon Digital go up and down completely randomly.

Pair Corralation between Terawulf and Marathon Digital

Given the investment horizon of 90 days Terawulf is expected to under-perform the Marathon Digital. But the stock apears to be less risky and, when comparing its historical volatility, Terawulf is 1.43 times less risky than Marathon Digital. The stock trades about -0.17 of its potential returns per unit of risk. The Marathon Digital Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,944  in Marathon Digital Holdings on February 23, 2024 and sell it today you would earn a total of  180.00  from holding Marathon Digital Holdings or generate 9.26% return on investment over 90 days.

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

Terawulf  vs.  Marathon Digital Holdings

Terawulf

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Terawulf are ranked lower than 3 (%) 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.

Marathon Digital Holdings

Risk-Adjusted Performance

0 of 100

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 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.

Pair Trading with Terawulf and Marathon Digital

The main advantage of trading using opposite Terawulf and Marathon Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terawulf 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 Terawulf 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..