Correlation Between Highlight Communications and H2O Retailing
Can any of the company-specific risk be diversified away by investing in both Highlight Communications and H2O Retailing 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 Highlight Communications and H2O Retailing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Highlight Communications AG and H2O Retailing, you can compare the effects of market volatilities on Highlight Communications and H2O Retailing 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 Highlight Communications with a short position of H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Highlight Communications and H2O Retailing.
Diversification Opportunities for Highlight Communications and H2O Retailing
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Highlight and H2O is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Highlight Communications AG and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing and Highlight Communications 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 Highlight Communications AG are associated (or correlated) with H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of Highlight Communications i.e., Highlight Communications and H2O Retailing go up and down completely randomly.
Pair Corralation between Highlight Communications and H2O Retailing
Assuming the 90 days trading horizon Highlight Communications AG is expected to under-perform the H2O Retailing. But the stock apears to be less risky and, when comparing its historical volatility, Highlight Communications AG is 1.0 times less risky than H2O Retailing. The stock trades about -0.05 of its potential returns per unit of risk. The H2O Retailing is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 638.00 in H2O Retailing on October 19, 2024 and sell it today you would earn a total of 702.00 from holding H2O Retailing or generate 110.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Highlight Communications AG vs. H2O Retailing
Performance |
| Timeline |
| Highlight Communications |
| H2O Retailing |
Highlight Communications and H2O Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Highlight Communications and H2O Retailing
The main advantage of trading using opposite Highlight Communications and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highlight Communications position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.| Highlight Communications vs. The Yokohama Rubber | Highlight Communications vs. THRACE PLASTICS | Highlight Communications vs. NEWELL RUBBERMAID | Highlight Communications vs. ALBIS LEASING AG |
| H2O Retailing vs. DAIRY FARM INTL | H2O Retailing vs. FARM 51 GROUP | H2O Retailing vs. MAVEN WIRELESS SWEDEN | H2O Retailing vs. Sumitomo Mitsui Construction |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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