Correlation Between AeroSpace Technology and HB Technology
Can any of the company-specific risk be diversified away by investing in both AeroSpace Technology and HB Technology 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 AeroSpace Technology and HB Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AeroSpace Technology of and HB Technology TD, you can compare the effects of market volatilities on AeroSpace Technology and HB Technology 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 AeroSpace Technology with a short position of HB Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of AeroSpace Technology and HB Technology.
Diversification Opportunities for AeroSpace Technology and HB Technology
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AeroSpace and 078150 is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AeroSpace Technology of and HB Technology TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HB Technology TD and AeroSpace Technology 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 AeroSpace Technology of are associated (or correlated) with HB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HB Technology TD has no effect on the direction of AeroSpace Technology i.e., AeroSpace Technology and HB Technology go up and down completely randomly.
Pair Corralation between AeroSpace Technology and HB Technology
Assuming the 90 days trading horizon AeroSpace Technology of is expected to generate 0.76 times more return on investment than HB Technology. However, AeroSpace Technology of is 1.32 times less risky than HB Technology. It trades about 0.76 of its potential returns per unit of risk. HB Technology TD is currently generating about 0.37 per unit of risk. If you would invest 50,600 in AeroSpace Technology of on October 28, 2024 and sell it today you would earn a total of 25,500 from holding AeroSpace Technology of or generate 50.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AeroSpace Technology of vs. HB Technology TD
Performance |
| Timeline |
| AeroSpace Technology |
| HB Technology TD |
AeroSpace Technology and HB Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AeroSpace Technology and HB Technology
The main advantage of trading using opposite AeroSpace Technology and HB Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AeroSpace Technology position performs unexpectedly, HB Technology 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 HB Technology will offset losses from the drop in HB Technology's long position.The idea behind AeroSpace Technology of and HB Technology TD 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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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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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