Correlation Between ICD and HMM
Can any of the company-specific risk be diversified away by investing in both ICD and HMM 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 ICD and HMM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ICD Co and HMM Co, you can compare the effects of market volatilities on ICD and HMM 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 ICD with a short position of HMM. Check out your portfolio center. Please also check ongoing floating volatility patterns of ICD and HMM.
Diversification Opportunities for ICD and HMM
Good diversification
The 3 months correlation between ICD and HMM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding ICD Co and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and ICD 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 ICD Co are associated (or correlated) with HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of ICD i.e., ICD and HMM go up and down completely randomly.
Pair Corralation between ICD and HMM
Assuming the 90 days trading horizon ICD Co is expected to under-perform the HMM. But the stock apears to be less risky and, when comparing its historical volatility, ICD Co is 1.01 times less risky than HMM. The stock trades about -0.03 of its potential returns per unit of risk. The HMM Co is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 1,999,522 in HMM Co on September 3, 2024 and sell it today you would lose (203,522) from holding HMM Co or give up 10.18% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ICD Co vs. HMM Co
Performance |
| Timeline |
| ICD Co |
| HMM Co |
ICD and HMM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ICD and HMM
The main advantage of trading using opposite ICD and HMM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ICD position performs unexpectedly, HMM 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 HMM will offset losses from the drop in HMM's long position.| ICD vs. SFA Engineering | ICD vs. APS Holdings | ICD vs. Soulbrain Holdings Co | ICD vs. JUSUNG ENGINEERING Co |
| HMM vs. Daeduck Electronics Co | HMM vs. DB Financial Investment | HMM vs. Shinil Electronics Co | HMM vs. Samyoung Electronics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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