Correlation Between Matrix and Hilan
Can any of the company-specific risk be diversified away by investing in both Matrix and Hilan 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 Matrix and Hilan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Matrix and Hilan, you can compare the effects of market volatilities on Matrix and Hilan 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 Matrix with a short position of Hilan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Matrix and Hilan.
Diversification Opportunities for Matrix and Hilan
Very poor diversification
The 3 months correlation between Matrix and Hilan is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Matrix and Hilan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilan and Matrix 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 Matrix are associated (or correlated) with Hilan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilan has no effect on the direction of Matrix i.e., Matrix and Hilan go up and down completely randomly.
Pair Corralation between Matrix and Hilan
Assuming the 90 days trading horizon Matrix is expected to generate 0.78 times more return on investment than Hilan. However, Matrix is 1.28 times less risky than Hilan. It trades about 0.16 of its potential returns per unit of risk. Hilan is currently generating about 0.12 per unit of risk. If you would invest 854,700 in Matrix on November 3, 2024 and sell it today you would earn a total of 26,700 from holding Matrix or generate 3.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Matrix vs. Hilan
Performance |
| Timeline |
| Matrix |
| Hilan |
Matrix and Hilan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Matrix and Hilan
The main advantage of trading using opposite Matrix and Hilan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Matrix position performs unexpectedly, Hilan 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 Hilan will offset losses from the drop in Hilan's long position.The idea behind Matrix and Hilan 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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