Correlation Between Polaris Office and HMM

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

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

Diversification Opportunities for Polaris Office and HMM

0.61

Correlation Coefficient

Polaris Office  HMM

Poor diversification

The 3 months correlation between Polaris and HMM is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Polaris Office Corp and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and Polaris Office 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 Polaris Office Corp are associated (or correlated) with HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of Polaris Office i.e., Polaris Office and HMM go up and down completely randomly.

Pair Corralation between Polaris Office and HMM

Assuming the 90 days trading horizon Polaris Office Corp is expected to generate 3.14 times more return on investment than HMM. However, Polaris Office is 3.14 times more volatile than HMM Co. It trades about 0.06 of its potential returns per unit of risk. HMM Co is currently generating about -0.03 per unit of risk. If you would invest  526,000  in Polaris Office Corp on September 22, 2024 and sell it today you would earn a total of  25,000  from holding Polaris Office Corp or generate 4.75% return on investment over 90 days.

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

Polaris Office Corp  vs.  HMM Co

Polaris Office Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Polaris Office Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Polaris Office is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

HMM Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HMM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Polaris Office and HMM

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

The idea behind Polaris Office Corp and HMM 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.