Correlation Between HMM and Sam A

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

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

Diversification Opportunities for HMM and Sam A

-0.37

Correlation Coefficient

HMM  Sam A

Very good diversification

The 3 months correlation between HMM and Sam is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding HMM Co and Sam A Pharm Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sam A Pharm and HMM 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 HMM Co are associated (or correlated) with Sam A. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sam A Pharm has no effect on the direction of HMM i.e., HMM and Sam A go up and down completely randomly.

Pair Corralation between HMM and Sam A

Assuming the 90 days trading horizon HMM Co is expected to generate 2.64 times more return on investment than Sam A. However, HMM is 2.64 times more volatile than Sam A Pharm Co. It trades about 0.1 of its potential returns per unit of risk. Sam A Pharm Co is currently generating about -0.06 per unit of risk. If you would invest  1,713,020  in HMM Co on December 30, 2024 and sell it today you would earn a total of  253,980  from holding HMM Co or generate 14.83% return on investment over 90 days.

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

HMM Co  vs.  Sam A Pharm Co

HMM Co

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMM sustained solid returns over the last few months and may actually be approaching a breakup point.

Sam A Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sam A Pharm Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sam A is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HMM and Sam A

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

The idea behind HMM Co and Sam A Pharm Co 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..