Correlation Between HUT 8 and Deere
Can any of the company-specific risk be diversified away by investing in both HUT 8 and Deere 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 Deere 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 Deere Company, you can compare the effects of market volatilities on HUT 8 and Deere 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 Deere. Check out your portfolio center. Please also check ongoing floating volatility patterns of HUT 8 and Deere.
Diversification Opportunities for HUT 8 and Deere
Poor diversification
The 3 months correlation between HUT and Deere is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding HUT 8 P and Deere Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Deere Company 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 Deere. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Deere Company has no effect on the direction of HUT 8 i.e., HUT 8 and Deere go up and down completely randomly.
Pair Corralation between HUT 8 and Deere
Assuming the 90 days horizon HUT 8 P is expected to generate 2.77 times more return on investment than Deere. However, HUT 8 is 2.77 times more volatile than Deere Company. It trades about 0.4 of its potential returns per unit of risk. Deere Company is currently generating about 0.3 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 Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HUT 8 P vs. Deere Company
Performance |
| Timeline |
| HUT 8 P |
| Deere Company |
HUT 8 and Deere Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HUT 8 and Deere
The main advantage of trading using opposite HUT 8 and Deere positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HUT 8 position performs unexpectedly, Deere 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 Deere will offset losses from the drop in Deere's long position.The idea behind HUT 8 P and Deere Company 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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