Correlation Between LPL Financial and Hut 8

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

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

Diversification Opportunities for LPL Financial and Hut 8

0.96

Correlation Coefficient

LPL Financial  Hut 8

Almost no diversification

The 3 months correlation between LPL and Hut is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding LPL Financial Holdings and Hut 8 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hut 8 Corp and LPL Financial 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 LPL Financial Holdings 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 Corp has no effect on the direction of LPL Financial i.e., LPL Financial and Hut 8 go up and down completely randomly.

Pair Corralation between LPL Financial and Hut 8

Given the investment horizon of 90 days LPL Financial is expected to generate 4.02 times less return on investment than Hut 8. But when comparing it to its historical volatility, LPL Financial Holdings is 6.61 times less risky than Hut 8. It trades about 0.06 of its potential returns per unit of risk. Hut 8 Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,348  in Hut 8 Corp on September 22, 2024 and sell it today you would earn a total of  20.00  from holding Hut 8 Corp or generate 0.85% return on investment over 90 days.

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

LPL Financial Holdings  vs.  Hut 8 Corp

LPL Financial Holdings

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in LPL Financial Holdings are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, LPL Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Hut 8 Corp

Risk-Adjusted Performance

15 of 100

Good

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

Pair Trading with LPL Financial and Hut 8

The main advantage of trading using opposite LPL Financial and Hut 8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LPL Financial 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 LPL Financial Holdings and Hut 8 Corp 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.