Correlation Between Hardide PLC and Central Asia
Can any of the company-specific risk be diversified away by investing in both Hardide PLC and Central Asia 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 Hardide PLC and Central Asia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hardide PLC and Central Asia Metals, you can compare the effects of market volatilities on Hardide PLC and Central Asia 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 Hardide PLC with a short position of Central Asia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hardide PLC and Central Asia.
Diversification Opportunities for Hardide PLC and Central Asia
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hardide and Central is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Hardide PLC and Central Asia Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Asia Metals and Hardide PLC 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 Hardide PLC are associated (or correlated) with Central Asia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Asia Metals has no effect on the direction of Hardide PLC i.e., Hardide PLC and Central Asia go up and down completely randomly.
Pair Corralation between Hardide PLC and Central Asia
Assuming the 90 days trading horizon Hardide PLC is expected to generate 2.16 times more return on investment than Central Asia. However, Hardide PLC is 2.16 times more volatile than Central Asia Metals. It trades about 0.12 of its potential returns per unit of risk. Central Asia Metals is currently generating about -0.28 per unit of risk. If you would invest 455.00 in Hardide PLC on August 30, 2024 and sell it today you would earn a total of 30.00 from holding Hardide PLC or generate 6.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hardide PLC vs. Central Asia Metals
Performance |
| Timeline |
| Hardide PLC |
| Central Asia Metals |
Hardide PLC and Central Asia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hardide PLC and Central Asia
The main advantage of trading using opposite Hardide PLC and Central Asia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hardide PLC position performs unexpectedly, Central Asia 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 Central Asia will offset losses from the drop in Central Asia's long position.The idea behind Hardide PLC and Central Asia Metals 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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