Correlation Between Hilan and Electra Co
Can any of the company-specific risk be diversified away by investing in both Hilan and Electra Co 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 Hilan and Electra Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hilan and Electra Co Pr, you can compare the effects of market volatilities on Hilan and Electra Co 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 Hilan with a short position of Electra Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilan and Electra Co.
Diversification Opportunities for Hilan and Electra Co
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hilan and Electra is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Hilan and Electra Co Pr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Electra Co Pr and Hilan 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 Hilan are associated (or correlated) with Electra Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Electra Co Pr has no effect on the direction of Hilan i.e., Hilan and Electra Co go up and down completely randomly.
Pair Corralation between Hilan and Electra Co
Assuming the 90 days trading horizon Hilan is expected to generate 0.56 times more return on investment than Electra Co. However, Hilan is 1.78 times less risky than Electra Co. It trades about 0.08 of its potential returns per unit of risk. Electra Co Pr is currently generating about 0.03 per unit of risk. If you would invest 1,496,819 in Hilan on November 27, 2024 and sell it today you would earn a total of 830,181 from holding Hilan or generate 55.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hilan vs. Electra Co Pr
Performance |
| Timeline |
| Hilan |
| Electra Co Pr |
Hilan and Electra Co Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hilan and Electra Co
The main advantage of trading using opposite Hilan and Electra Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilan position performs unexpectedly, Electra Co 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 Electra Co will offset losses from the drop in Electra Co's long position.The idea behind Hilan and Electra Co Pr 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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