Correlation Between HMM and System
Can any of the company-specific risk be diversified away by investing in both HMM and System 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 HMM and System into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HMM Co and System and Application, you can compare the effects of market volatilities on HMM and System 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 HMM with a short position of System. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMM and System.
Diversification Opportunities for HMM and System
Very weak diversification
The 3 months correlation between HMM and System is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding HMM Co and System and Application in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on System and Application and HMM 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 HMM Co are associated (or correlated) with System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of System and Application has no effect on the direction of HMM i.e., HMM and System go up and down completely randomly.
Pair Corralation between HMM and System
Assuming the 90 days trading horizon HMM Co is expected to generate 1.32 times more return on investment than System. However, HMM is 1.32 times more volatile than System and Application. It trades about 0.11 of its potential returns per unit of risk. System and Application is currently generating about 0.07 per unit of risk. If you would invest 1,817,000 in HMM Co on October 25, 2024 and sell it today you would earn a total of 100,000 from holding HMM Co or generate 5.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HMM Co vs. System and Application
Performance |
| Timeline |
| HMM Co |
| System and Application |
HMM and System Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HMM and System
The main advantage of trading using opposite HMM and System positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMM position performs unexpectedly, System 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 System will offset losses from the drop in System's long position.| HMM vs. Songwon Industrial Co | HMM vs. Seah Steel Corp | HMM vs. Dong A Steel Technology | HMM vs. Lee Ku Industrial |
| System vs. Samsung Electronics Co | System vs. Samsung Electronics Co | System vs. SK Hynix | System vs. HMM Co |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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