Correlation Between Pressure Technologies and Hilton Food
Can any of the company-specific risk be diversified away by investing in both Pressure Technologies and Hilton Food 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 Pressure Technologies and Hilton Food into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pressure Technologies Plc and Hilton Food Group, you can compare the effects of market volatilities on Pressure Technologies and Hilton Food 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 Pressure Technologies with a short position of Hilton Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pressure Technologies and Hilton Food.
Diversification Opportunities for Pressure Technologies and Hilton Food
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pressure and Hilton is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Pressure Technologies Plc and Hilton Food Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilton Food Group and Pressure Technologies 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 Pressure Technologies Plc are associated (or correlated) with Hilton Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilton Food Group has no effect on the direction of Pressure Technologies i.e., Pressure Technologies and Hilton Food go up and down completely randomly.
Pair Corralation between Pressure Technologies and Hilton Food
Assuming the 90 days trading horizon Pressure Technologies Plc is expected to generate 1.5 times more return on investment than Hilton Food. However, Pressure Technologies is 1.5 times more volatile than Hilton Food Group. It trades about 0.17 of its potential returns per unit of risk. Hilton Food Group is currently generating about -0.15 per unit of risk. If you would invest 3,550 in Pressure Technologies Plc on October 12, 2024 and sell it today you would earn a total of 200.00 from holding Pressure Technologies Plc or generate 5.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pressure Technologies Plc vs. Hilton Food Group
Performance |
| Timeline |
| Pressure Technologies Plc |
| Hilton Food Group |
Pressure Technologies and Hilton Food Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pressure Technologies and Hilton Food
The main advantage of trading using opposite Pressure Technologies and Hilton Food positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pressure Technologies position performs unexpectedly, Hilton Food 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 Hilton Food will offset losses from the drop in Hilton Food's long position.The idea behind Pressure Technologies Plc and Hilton Food Group 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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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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