Correlation Between Hivemapper and DENT
Can any of the company-specific risk be diversified away by investing in both Hivemapper and DENT 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 Hivemapper and DENT into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hivemapper and DENT, you can compare the effects of market volatilities on Hivemapper and DENT 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 Hivemapper with a short position of DENT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hivemapper and DENT.
Diversification Opportunities for Hivemapper and DENT
0.22 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hivemapper and DENT is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Hivemapper and DENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DENT and Hivemapper 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 Hivemapper are associated (or correlated) with DENT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DENT has no effect on the direction of Hivemapper i.e., Hivemapper and DENT go up and down completely randomly.
Pair Corralation between Hivemapper and DENT
Assuming the 90 days trading horizon Hivemapper is expected to generate 1.31 times less return on investment than DENT. In addition to that, Hivemapper is 1.6 times more volatile than DENT. It trades about 0.09 of its total potential returns per unit of risk. DENT is currently generating about 0.18 per unit of volatility. If you would invest 0.09 in DENT on August 23, 2024 and sell it today you would earn a total of 0.02 from holding DENT or generate 20.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hivemapper vs. DENT
Performance |
| Timeline |
| Hivemapper |
| DENT |
Hivemapper and DENT Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hivemapper and DENT
The main advantage of trading using opposite Hivemapper and DENT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hivemapper position performs unexpectedly, DENT 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 DENT will offset losses from the drop in DENT's long position.The idea behind Hivemapper and DENT 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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