Correlation Between Husteel and Nature

Can any of the company-specific risk be diversified away by investing in both Husteel and Nature 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 Husteel and Nature into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Husteel and Nature and Environment, you can compare the effects of market volatilities on Husteel and Nature 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 Husteel with a short position of Nature. Check out your portfolio center. Please also check ongoing floating volatility patterns of Husteel and Nature.

Diversification Opportunities for Husteel and Nature

-0.2

Correlation Coefficient

Husteel  Nature

Good diversification

The 3 months correlation between Husteel and Nature is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Husteel and Nature and Environment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature and Environment and Husteel 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 Husteel are associated (or correlated) with Nature. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature and Environment has no effect on the direction of Husteel i.e., Husteel and Nature go up and down completely randomly.

Pair Corralation between Husteel and Nature

Assuming the 90 days trading horizon Husteel is expected to generate 4.74 times more return on investment than Nature. However, Husteel is 4.74 times more volatile than Nature and Environment. It trades about 0.39 of its potential returns per unit of risk. Nature and Environment is currently generating about -0.14 per unit of risk. If you would invest  424,000  in Husteel on December 10, 2024 and sell it today you would earn a total of  206,000  from holding Husteel or generate 48.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Husteel  vs.  Nature and Environment

Husteel

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Husteel are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Husteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Nature and Environment

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Nature and Environment are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nature may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Husteel and Nature

The main advantage of trading using opposite Husteel and Nature positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Husteel position performs unexpectedly, Nature 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 Nature will offset losses from the drop in Nature's long position.

The idea behind Husteel and Nature and Environment 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.