Correlation Between Hilan and E M
Can any of the company-specific risk be diversified away by investing in both Hilan and E M 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 E M into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hilan and E M Computing, you can compare the effects of market volatilities on Hilan and E M 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 E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilan and E M.
Diversification Opportunities for Hilan and E M
Very poor diversification
The 3 months correlation between Hilan and EMCO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Hilan and E M Computing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M Computing 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 E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M Computing has no effect on the direction of Hilan i.e., Hilan and E M go up and down completely randomly.
Pair Corralation between Hilan and E M
Assuming the 90 days trading horizon Hilan is expected to generate 0.61 times more return on investment than E M. However, Hilan is 1.65 times less risky than E M. It trades about 0.22 of its potential returns per unit of risk. E M Computing is currently generating about 0.05 per unit of risk. If you would invest 2,207,000 in Hilan on November 28, 2024 and sell it today you would earn a total of 103,000 from holding Hilan or generate 4.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hilan vs. E M Computing
Performance |
| Timeline |
| Hilan |
| E M Computing |
Hilan and E M Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hilan and E M
The main advantage of trading using opposite Hilan and E M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilan position performs unexpectedly, E M 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 E M will offset losses from the drop in E M's long position.The idea behind Hilan and E M Computing 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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