Correlation Between HE Equipment and Scholastic
Can any of the company-specific risk be diversified away by investing in both HE Equipment and Scholastic 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 HE Equipment and Scholastic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and Scholastic, you can compare the effects of market volatilities on HE Equipment and Scholastic 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 HE Equipment with a short position of Scholastic. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Scholastic.
Diversification Opportunities for HE Equipment and Scholastic
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HEES and Scholastic is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Scholastic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scholastic and HE Equipment 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 HE Equipment Services are associated (or correlated) with Scholastic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scholastic has no effect on the direction of HE Equipment i.e., HE Equipment and Scholastic go up and down completely randomly.
Pair Corralation between HE Equipment and Scholastic
Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.12 times more return on investment than Scholastic. However, HE Equipment is 1.12 times more volatile than Scholastic. It trades about -0.02 of its potential returns per unit of risk. Scholastic is currently generating about -0.07 per unit of risk. If you would invest 5,772 in HE Equipment Services on September 20, 2024 and sell it today you would lose (821.00) from holding HE Equipment Services or give up 14.22% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Scholastic
Performance |
| Timeline |
| HE Equipment Services |
| Scholastic |
HE Equipment and Scholastic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Scholastic
The main advantage of trading using opposite HE Equipment and Scholastic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, Scholastic 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 Scholastic will offset losses from the drop in Scholastic's long position.| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
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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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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