Correlation Between Tesla and Hut 8

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

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

Diversification Opportunities for Tesla and Hut 8

0.85

Correlation Coefficient

Tesla  Hut 8

Very poor diversification

The 3 months correlation between Tesla and Hut is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tesla Inc CDR 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 Tesla 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 Tesla Inc CDR 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 Tesla i.e., Tesla and Hut 8 go up and down completely randomly.

Pair Corralation between Tesla and Hut 8

Assuming the 90 days trading horizon Tesla Inc CDR is expected to generate 0.63 times more return on investment than Hut 8. However, Tesla Inc CDR is 1.59 times less risky than Hut 8. It trades about 0.11 of its potential returns per unit of risk. Hut 8 Mining is currently generating about -0.04 per unit of risk. If you would invest  3,204  in Tesla Inc CDR on October 4, 2024 and sell it today you would earn a total of  254.00  from holding Tesla Inc CDR or generate 7.93% return on investment over 90 days.

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

Tesla Inc CDR  vs.  Hut 8 Mining

Tesla Inc CDR

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tesla Inc CDR are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal technical and fundamental indicators, Tesla exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hut 8 Mining

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hut 8 Mining are ranked lower than 14 (%) 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 Tesla and Hut 8

The main advantage of trading using opposite Tesla and Hut 8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesla 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 Tesla Inc CDR 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.