Correlation Between HMM and ITM Semiconductor

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

By analyzing existing cross correlation between HMM Co and ITM Semiconductor Co, you can compare the effects of market volatilities on HMM and ITM Semiconductor 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 ITM Semiconductor. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMM and ITM Semiconductor.

Diversification Opportunities for HMM and ITM Semiconductor

-0.27

Correlation Coefficient

HMM  ITM Semiconductor

Very good diversification

The 3 months correlation between HMM and ITM is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding HMM Co and ITM Semiconductor Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITM Semiconductor 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 ITM Semiconductor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITM Semiconductor has no effect on the direction of HMM i.e., HMM and ITM Semiconductor go up and down completely randomly.

Pair Corralation between HMM and ITM Semiconductor

Assuming the 90 days trading horizon HMM Co is expected to generate 1.05 times more return on investment than ITM Semiconductor. However, HMM is 1.05 times more volatile than ITM Semiconductor Co. It trades about 0.1 of its potential returns per unit of risk. ITM Semiconductor Co is currently generating about -0.05 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.  ITM Semiconductor 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.

ITM Semiconductor

Risk-Adjusted Performance

Very Weak

Over the last 90 days ITM Semiconductor Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with HMM and ITM Semiconductor

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

The idea behind HMM Co and ITM Semiconductor 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.