Correlation Between HUT 8 and Advanced Drainage
Can any of the company-specific risk be diversified away by investing in both HUT 8 and Advanced Drainage 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 HUT 8 and Advanced Drainage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HUT 8 P and Advanced Drainage Systems, you can compare the effects of market volatilities on HUT 8 and Advanced Drainage 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 HUT 8 with a short position of Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUT 8 and Advanced Drainage.
Diversification Opportunities for HUT 8 and Advanced Drainage
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HUT and Advanced is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding HUT 8 P and Advanced Drainage Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Drainage Systems and HUT 8 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 HUT 8 P are associated (or correlated) with Advanced Drainage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Drainage Systems has no effect on the direction of HUT 8 i.e., HUT 8 and Advanced Drainage go up and down completely randomly.
Pair Corralation between HUT 8 and Advanced Drainage
Assuming the 90 days horizon HUT 8 P is expected to generate 1.9 times more return on investment than Advanced Drainage. However, HUT 8 is 1.9 times more volatile than Advanced Drainage Systems. It trades about 0.4 of its potential returns per unit of risk. Advanced Drainage Systems is currently generating about -0.07 per unit of risk. If you would invest 1,490 in HUT 8 P on September 1, 2024 and sell it today you would earn a total of 1,180 from holding HUT 8 P or generate 79.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HUT 8 P vs. Advanced Drainage Systems
Performance |
| Timeline |
| HUT 8 P |
| Advanced Drainage Systems |
HUT 8 and Advanced Drainage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HUT 8 and Advanced Drainage
The main advantage of trading using opposite HUT 8 and Advanced Drainage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUT 8 position performs unexpectedly, Advanced Drainage 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 Advanced Drainage will offset losses from the drop in Advanced Drainage's long position.The idea behind HUT 8 P and Advanced Drainage Systems 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.| Advanced Drainage vs. Bridgestone | Advanced Drainage vs. The Goodyear Tire | Advanced Drainage vs. Sumitomo Rubber Industries | Advanced Drainage vs. Zeon Corporation |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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