March 28, 2024

What are the alpha and beta of public mining companies?

An overview of the alpha and beta indicators of mining companies traded on exchanges.

Shares of public minersgenerate alpha and have more volatility than bitcoin.

  • MARA and HUT have generated the largest alpha since the beginning of the year compared to Bitcoin.
  • BTBT, RIOT and HIVE have not created a positive alpha since the start of the year compared to Bitcoin.
  • All miners have a beta of more than 1 since the beginning of the year.

What do alpha and beta mean?

Alpha is a statistic that reflectsthe comparative profitability of an asset compared to a certain index. An alpha of +5 or -5 would indicate that the investment generated 5% more or less return than the index, respectively. Essentially, alpha measures the excess return of an asset relative to an index. Traditionally, alpha for stocks is calculated relative to the S&P 500. But in our calculations, we compared the returns on miner stocks with spot Bitcoin.

Beta is a statistic that reflectsthe volatility of the asset versus the index. A beta of 1 indicates that the price movement of an asset over a given period matches the index. Beta less than 1 means that the asset is less volatile than the index, and beta greater than 1 means that the asset is more volatile than the index. For example, a beta of 1.5 means that the asset's volatility is 50% higher than the index's volatility. Sometimes beta can be negative, which means that the asset and the index are moving in opposite directions, which indicates a negative correlation between them.

Alpha and beta limits includevolatility (depending on the selected period) and dependence on historical data (past results cannot really indicate future ones).

Alpha and beta of public miners

Tracking the alpha and beta of public miningcompanies versus bitcoin can provide investors with an idea of ​​the level of excess returns and volatility of these investments. If a particular stock exhibits a weak alpha and a high beta, then simply holding on to Bitcoin has obviously been a more winning strategy historically. As you might expect, miners generate alpha over a long period and are subject to more volatility compared to Bitcoin.

Since the beginning of the year, MARA has generated the largestan alpha of 294, which implies a super return of 294% compared to the "modest" 107% return on bitcoin. On the other hand, BTBT, RIOT and HIVE failed to generate a positive alpha despite the rise in the share price (excluding BTBT). However, all miners except BTBT generated positive alpha over a period of one to three years. Beta values ​​for all miners are above 1, which suggests that their stocks are more volatile compared to Bitcoin and have historically offered higher returns.

The tables below show the alpha and beta shares of mining companies for different periods.

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