Correlation Between HE Equipment and Zumiez
Can any of the company-specific risk be diversified away by investing in both HE Equipment and Zumiez 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 Zumiez 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 Zumiez Inc, you can compare the effects of market volatilities on HE Equipment and Zumiez 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 Zumiez. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Zumiez.
Diversification Opportunities for HE Equipment and Zumiez
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between HEES and Zumiez is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Zumiez Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zumiez Inc 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 Zumiez. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zumiez Inc has no effect on the direction of HE Equipment i.e., HE Equipment and Zumiez go up and down completely randomly.
Pair Corralation between HE Equipment and Zumiez
Given the investment horizon of 90 days HE Equipment Services is expected to generate 0.86 times more return on investment than Zumiez. However, HE Equipment Services is 1.16 times less risky than Zumiez. It trades about 0.02 of its potential returns per unit of risk. Zumiez Inc is currently generating about 0.01 per unit of risk. If you would invest 4,402 in HE Equipment Services on September 19, 2024 and sell it today you would earn a total of 549.00 from holding HE Equipment Services or generate 12.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Zumiez Inc
Performance |
| Timeline |
| HE Equipment Services |
| Zumiez Inc |
HE Equipment and Zumiez Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Zumiez
The main advantage of trading using opposite HE Equipment and Zumiez positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, Zumiez 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 Zumiez will offset losses from the drop in Zumiez's long position.| HE Equipment vs. McGrath RentCorp | HE Equipment vs. Custom Truck One | HE Equipment vs. Alta Equipment Group | HE Equipment vs. PROG Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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