Correlation Between Hut 8 and Big Rock

Can any of the company-specific risk be diversified away by investing in both Hut 8 and Big Rock 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 Big Rock 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 Big Rock Brewery, you can compare the effects of market volatilities on Hut 8 and Big Rock 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 Big Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hut 8 and Big Rock.

Diversification Opportunities for Hut 8 and Big Rock

-0.33

Correlation Coefficient

Hut 8  Big Rock

Very good diversification

The 3 months correlation between Hut and Big is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Hut 8 Mining and Big Rock Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Big Rock Brewery 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 Big Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Big Rock Brewery has no effect on the direction of Hut 8 i.e., Hut 8 and Big Rock go up and down completely randomly.

Pair Corralation between Hut 8 and Big Rock

Assuming the 90 days trading horizon Hut 8 is expected to generate 2.44 times less return on investment than Big Rock. But when comparing it to its historical volatility, Hut 8 Mining is 1.58 times less risky than Big Rock. It trades about 0.06 of its potential returns per unit of risk. Big Rock Brewery is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  6.33  in Big Rock Brewery on October 12, 2024 and sell it today you would earn a total of  107.67  from holding Big Rock Brewery or generate 1700.95% return on investment over 90 days.

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

Hut 8 Mining  vs.  Big Rock Brewery

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.

Big Rock Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Big Rock Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Big Rock is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hut 8 and Big Rock

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

The idea behind Hut 8 Mining and Big Rock Brewery 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.