Correlation Between Hawkins and NewMarket
Can any of the company-specific risk be diversified away by investing in both Hawkins and NewMarket 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 Hawkins and NewMarket into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hawkins and NewMarket, you can compare the effects of market volatilities on Hawkins and NewMarket 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 Hawkins with a short position of NewMarket. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawkins and NewMarket.
Diversification Opportunities for Hawkins and NewMarket
Poor diversification
The 3 months correlation between Hawkins and NewMarket is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and NewMarket in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewMarket and Hawkins 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 Hawkins are associated (or correlated) with NewMarket. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewMarket has no effect on the direction of Hawkins i.e., Hawkins and NewMarket go up and down completely randomly.
Pair Corralation between Hawkins and NewMarket
Given the investment horizon of 90 days Hawkins is expected to under-perform the NewMarket. In addition to that, Hawkins is 2.25 times more volatile than NewMarket. It trades about -0.18 of its total potential returns per unit of risk. NewMarket is currently generating about -0.08 per unit of volatility. If you would invest 51,057 in NewMarket on November 3, 2024 and sell it today you would lose (1,255) from holding NewMarket or give up 2.46% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hawkins vs. NewMarket
Performance |
| Timeline |
| Hawkins |
| NewMarket |
Hawkins and NewMarket Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hawkins and NewMarket
The main advantage of trading using opposite Hawkins and NewMarket positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawkins position performs unexpectedly, NewMarket 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 NewMarket will offset losses from the drop in NewMarket's long position.| Hawkins vs. H B Fuller | Hawkins vs. Minerals Technologies | Hawkins vs. Quaker Chemical | Hawkins vs. Oil Dri |
| NewMarket vs. H B Fuller | NewMarket vs. Minerals Technologies | NewMarket vs. Quaker Chemical | NewMarket vs. Oil Dri |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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