Correlation Between HVA Foods and Alumex PLC

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Can any of the company-specific risk be diversified away by investing in both HVA Foods and Alumex PLC 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 HVA Foods and Alumex PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HVA Foods PLC and Alumex PLC, you can compare the effects of market volatilities on HVA Foods and Alumex PLC 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 HVA Foods with a short position of Alumex PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of HVA Foods and Alumex PLC.

Diversification Opportunities for HVA Foods and Alumex PLC

0.34
  Correlation Coefficient

Weak diversification

The 3 months correlation between HVA and Alumex is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HVA Foods PLC and Alumex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumex PLC and HVA Foods 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 HVA Foods PLC are associated (or correlated) with Alumex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumex PLC has no effect on the direction of HVA Foods i.e., HVA Foods and Alumex PLC go up and down completely randomly.

Pair Corralation between HVA Foods and Alumex PLC

Assuming the 90 days trading horizon HVA Foods is expected to generate 2.07 times less return on investment than Alumex PLC. In addition to that, HVA Foods is 1.6 times more volatile than Alumex PLC. It trades about 0.03 of its total potential returns per unit of risk. Alumex PLC is currently generating about 0.11 per unit of volatility. If you would invest  1,090  in Alumex PLC on September 2, 2024 and sell it today you would earn a total of  130.00  from holding Alumex PLC or generate 11.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

HVA Foods PLC  vs.  Alumex PLC

 Performance 
       Timeline  
HVA Foods PLC 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HVA Foods PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HVA Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Alumex PLC 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Alumex PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alumex PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

HVA Foods and Alumex PLC Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HVA Foods and Alumex PLC

The main advantage of trading using opposite HVA Foods and Alumex PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HVA Foods position performs unexpectedly, Alumex PLC 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 Alumex PLC will offset losses from the drop in Alumex PLC's long position.
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The idea behind HVA Foods PLC and Alumex PLC 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.
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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