Correlation Between Enbridge Pref and Hut 8

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

By analyzing existing cross correlation between Enbridge Pref 13 and Hut 8 Mining, you can compare the effects of market volatilities on Enbridge Pref 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 Enbridge Pref with a short position of Hut 8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge Pref and Hut 8.

Diversification Opportunities for Enbridge Pref and Hut 8

0.68

Correlation Coefficient

Enbridge Pref  Hut 8

Poor diversification

The 3 months correlation between Enbridge and Hut is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge Pref 13 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 Enbridge Pref 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 Enbridge Pref 13 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 Enbridge Pref i.e., Enbridge Pref and Hut 8 go up and down completely randomly.

Pair Corralation between Enbridge Pref and Hut 8

Assuming the 90 days trading horizon Enbridge Pref is expected to generate 13.13 times less return on investment than Hut 8. But when comparing it to its historical volatility, Enbridge Pref 13 is 9.55 times less risky than Hut 8. It trades about 0.15 of its potential returns per unit of risk. Hut 8 Mining is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,563  in Hut 8 Mining on September 22, 2024 and sell it today you would earn a total of  1,837  from holding Hut 8 Mining or generate 117.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Enbridge Pref 13  vs.  Hut 8 Mining

Enbridge Pref 13

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge Pref 13 are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Enbridge Pref may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hut 8 Mining

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hut 8 Mining are ranked lower than 16 (%) 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 Enbridge Pref and Hut 8

The main advantage of trading using opposite Enbridge Pref and Hut 8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge Pref 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 Enbridge Pref 13 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.