Correlation Between Sui and HPB
Can any of the company-specific risk be diversified away by investing in both Sui and HPB 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 Sui and HPB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sui and HPB, you can compare the effects of market volatilities on Sui and HPB 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 Sui with a short position of HPB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sui and HPB.
Diversification Opportunities for Sui and HPB
Poor diversification
The 3 months correlation between Sui and HPB is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sui and HPB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HPB and Sui 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 Sui are associated (or correlated) with HPB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HPB has no effect on the direction of Sui i.e., Sui and HPB go up and down completely randomly.
Pair Corralation between Sui and HPB
Assuming the 90 days trading horizon Sui is expected to generate 1.84 times less return on investment than HPB. But when comparing it to its historical volatility, Sui is 4.66 times less risky than HPB. It trades about 0.16 of its potential returns per unit of risk. HPB is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 0.65 in HPB on August 27, 2024 and sell it today you would lose (0.16) from holding HPB or give up 25.27% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sui vs. HPB
Performance |
| Timeline |
| Sui |
| HPB |
Sui and HPB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sui and HPB
The main advantage of trading using opposite Sui and HPB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sui position performs unexpectedly, HPB 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 HPB will offset losses from the drop in HPB's long position.The idea behind Sui and HPB 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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