Correlation Between Eva Airways and Hota Industrial
Can any of the company-specific risk be diversified away by investing in both Eva Airways and Hota Industrial 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 Eva Airways and Hota Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eva Airways Corp and Hota Industrial Mfg, you can compare the effects of market volatilities on Eva Airways and Hota Industrial 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 Eva Airways with a short position of Hota Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eva Airways and Hota Industrial.
Diversification Opportunities for Eva Airways and Hota Industrial
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Eva and Hota is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Eva Airways Corp and Hota Industrial Mfg in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hota Industrial Mfg and Eva Airways 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 Eva Airways Corp are associated (or correlated) with Hota Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hota Industrial Mfg has no effect on the direction of Eva Airways i.e., Eva Airways and Hota Industrial go up and down completely randomly.
Pair Corralation between Eva Airways and Hota Industrial
Assuming the 90 days trading horizon Eva Airways Corp is expected to generate 0.52 times more return on investment than Hota Industrial. However, Eva Airways Corp is 1.94 times less risky than Hota Industrial. It trades about 0.13 of its potential returns per unit of risk. Hota Industrial Mfg is currently generating about -0.23 per unit of risk. If you would invest 4,635 in Eva Airways Corp on November 2, 2024 and sell it today you would earn a total of 135.00 from holding Eva Airways Corp or generate 2.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Eva Airways Corp vs. Hota Industrial Mfg
Performance |
| Timeline |
| Eva Airways Corp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Solid
| Hota Industrial Mfg |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Insignificant
Eva Airways and Hota Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eva Airways and Hota Industrial
The main advantage of trading using opposite Eva Airways and Hota Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eva Airways position performs unexpectedly, Hota Industrial 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 Hota Industrial will offset losses from the drop in Hota Industrial's long position.The idea behind Eva Airways Corp and Hota Industrial Mfg 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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