Correlation Between Algonquin Power and Hut 8

Can any of the company-specific risk be diversified away by investing in both Algonquin Power and Hut 8 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 Algonquin Power and Hut 8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Algonquin Power Utilities and Hut 8 Mining, you can compare the effects of market volatilities on Algonquin Power and Hut 8 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 Algonquin Power with a short position of Hut 8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Algonquin Power and Hut 8.

Diversification Opportunities for Algonquin Power and Hut 8

-0.01

Correlation Coefficient

Algonquin Power  Hut 8

Good diversification

The 3 months correlation between Algonquin and Hut is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Algonquin Power Utilities and Hut 8 Mining in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hut 8 Mining and Algonquin Power 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 Algonquin Power Utilities are associated (or correlated) with Hut 8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hut 8 Mining has no effect on the direction of Algonquin Power i.e., Algonquin Power and Hut 8 go up and down completely randomly.

Pair Corralation between Algonquin Power and Hut 8

Assuming the 90 days trading horizon Algonquin Power Utilities is expected to generate 0.09 times more return on investment than Hut 8. However, Algonquin Power Utilities is 11.49 times less risky than Hut 8. It trades about 0.27 of its potential returns per unit of risk. Hut 8 Mining is currently generating about -0.06 per unit of risk. If you would invest  2,346  in Algonquin Power Utilities on October 1, 2024 and sell it today you would earn a total of  75.00  from holding Algonquin Power Utilities or generate 3.2% return on investment over 90 days.

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

Algonquin Power Utilities  vs.  Hut 8 Mining

Algonquin Power Utilities

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algonquin Power Utilities are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Algonquin Power is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hut 8 Mining

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hut 8 Mining are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Hut 8 displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Algonquin Power and Hut 8

The main advantage of trading using opposite Algonquin Power and Hut 8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Algonquin Power position performs unexpectedly, Hut 8 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 Hut 8 will offset losses from the drop in Hut 8's long position.

The idea behind Algonquin Power Utilities and Hut 8 Mining 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.