Correlation Between Snap and HCI
Can any of the company-specific risk be diversified away by investing in both Snap and HCI 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 Snap and HCI into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Snap Inc and HCI Group, you can compare the effects of market volatilities on Snap and HCI 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 Snap with a short position of HCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Snap and HCI.
Diversification Opportunities for Snap and HCI
Poor diversification
The 3 months correlation between Snap and HCI is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Snap Inc and HCI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCI Group and Snap 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 Snap Inc are associated (or correlated) with HCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCI Group has no effect on the direction of Snap i.e., Snap and HCI go up and down completely randomly.
Pair Corralation between Snap and HCI
Given the investment horizon of 90 days Snap Inc is expected to generate 2.31 times more return on investment than HCI. However, Snap is 2.31 times more volatile than HCI Group. It trades about 0.1 of its potential returns per unit of risk. HCI Group is currently generating about 0.0 per unit of risk. If you would invest 1,071 in Snap Inc on August 29, 2024 and sell it today you would earn a total of 89.00 from holding Snap Inc or generate 8.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Snap Inc vs. HCI Group
Performance |
| Timeline |
| Snap Inc |
| HCI Group |
Snap and HCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Snap and HCI
The main advantage of trading using opposite Snap and HCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Snap position performs unexpectedly, HCI 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 HCI will offset losses from the drop in HCI's long position.The idea behind Snap Inc and HCI 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.| HCI vs. Universal Insurance Holdings | HCI vs. Kingstone Companies | HCI vs. Horace Mann Educators | HCI vs. Heritage Insurance Hldgs |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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