Correlation Between Basic Materials and H1ES34
Can any of the company-specific risk be diversified away by investing in both Basic Materials and H1ES34 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 Basic Materials and H1ES34 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Basic Materials and H1ES34, you can compare the effects of market volatilities on Basic Materials and H1ES34 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 Basic Materials with a short position of H1ES34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Basic Materials and H1ES34.
Diversification Opportunities for Basic Materials and H1ES34
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Basic and H1ES34 is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Basic Materials and H1ES34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H1ES34 and Basic Materials 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 Basic Materials are associated (or correlated) with H1ES34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H1ES34 has no effect on the direction of Basic Materials i.e., Basic Materials and H1ES34 go up and down completely randomly.
Pair Corralation between Basic Materials and H1ES34
Assuming the 90 days trading horizon Basic Materials is expected to under-perform the H1ES34. But the index apears to be less risky and, when comparing its historical volatility, Basic Materials is 1.04 times less risky than H1ES34. The index trades about -0.01 of its potential returns per unit of risk. The H1ES34 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 31,213 in H1ES34 on September 28, 2024 and sell it today you would earn a total of 6,711 from holding H1ES34 or generate 21.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Basic Materials vs. H1ES34
Performance |
| Timeline |
Basic Materials and H1ES34 Volatility Contrast
Predicted Return Density |
| Returns |
Basic Materials
Pair trading matchups for Basic Materials
H1ES34
Pair trading matchups for H1ES34
Pair Trading with Basic Materials and H1ES34
The main advantage of trading using opposite Basic Materials and H1ES34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Basic Materials position performs unexpectedly, H1ES34 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 H1ES34 will offset losses from the drop in H1ES34's long position.| Basic Materials vs. TAL Education Group | Basic Materials vs. Verizon Communications | Basic Materials vs. New Oriental Education | Basic Materials vs. Take Two Interactive Software |
| H1ES34 vs. ConocoPhillips | H1ES34 vs. EOG Resources | H1ES34 vs. Occidental Petroleum | H1ES34 vs. Devon Energy |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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