Correlation Between Hut 8 and Bitfarms

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

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

Diversification Opportunities for Hut 8 and Bitfarms

0.97

Correlation Coefficient

Hut 8  Bitfarms

Almost no diversification

The 3 months correlation between Hut and Bitfarms is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Hut 8 Mining and Bitfarms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bitfarms 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 Mining are associated (or correlated) with Bitfarms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bitfarms has no effect on the direction of Hut 8 i.e., Hut 8 and Bitfarms go up and down completely randomly.

Pair Corralation between Hut 8 and Bitfarms

Assuming the 90 days trading horizon Hut 8 Mining is expected to generate 1.18 times more return on investment than Bitfarms. However, Hut 8 is 1.18 times more volatile than Bitfarms. It trades about -0.13 of its potential returns per unit of risk. Bitfarms is currently generating about -0.17 per unit of risk. If you would invest  3,085  in Hut 8 Mining on December 30, 2024 and sell it today you would lose (1,406) from holding Hut 8 Mining or give up 45.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Hut 8 Mining  vs.  Bitfarms

Hut 8 Mining

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hut 8 Mining has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Bitfarms

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bitfarms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Hut 8 and Bitfarms

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

The idea behind Hut 8 Mining and Bitfarms 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.