Correlation Between Ferrari NV and HE Equipment
Can any of the company-specific risk be diversified away by investing in both Ferrari NV and HE Equipment 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 Ferrari NV and HE Equipment into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferrari NV and HE Equipment Services, you can compare the effects of market volatilities on Ferrari NV and HE Equipment 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 Ferrari NV with a short position of HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferrari NV and HE Equipment.
Diversification Opportunities for Ferrari NV and HE Equipment
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ferrari and HEES is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ferrari NV and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services and Ferrari NV 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 Ferrari NV are associated (or correlated) with HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Ferrari NV i.e., Ferrari NV and HE Equipment go up and down completely randomly.
Pair Corralation between Ferrari NV and HE Equipment
Given the investment horizon of 90 days Ferrari NV is expected to under-perform the HE Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Ferrari NV is 1.67 times less risky than HE Equipment. The stock trades about -0.23 of its potential returns per unit of risk. The HE Equipment Services is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 5,293 in HE Equipment Services on August 31, 2024 and sell it today you would earn a total of 640.00 from holding HE Equipment Services or generate 12.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferrari NV vs. HE Equipment Services
Performance |
| Timeline |
| Ferrari NV |
| HE Equipment Services |
Ferrari NV and HE Equipment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferrari NV and HE Equipment
The main advantage of trading using opposite Ferrari NV and HE Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferrari NV position performs unexpectedly, HE Equipment 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 HE Equipment will offset losses from the drop in HE Equipment's long position.| Ferrari NV vs. Tesla Inc | Ferrari NV vs. Li Auto | Ferrari NV vs. Rivian Automotive | Ferrari NV vs. Lucid Group |
| HE Equipment vs. GATX Corporation | HE Equipment vs. McGrath RentCorp | HE Equipment vs. Alta Equipment Group | HE Equipment vs. Ryder System |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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