Correlation Between Nature and Husteel

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

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

Diversification Opportunities for Nature and Husteel

0.68

Correlation Coefficient

Nature  Husteel

Poor diversification

The 3 months correlation between Nature and Husteel is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Nature and Environment and Husteel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Husteel and Nature 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 Nature and Environment are associated (or correlated) with Husteel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Husteel has no effect on the direction of Nature i.e., Nature and Husteel go up and down completely randomly.

Pair Corralation between Nature and Husteel

Assuming the 90 days trading horizon Nature and Environment is expected to under-perform the Husteel. In addition to that, Nature is 1.46 times more volatile than Husteel. It trades about -0.04 of its total potential returns per unit of risk. Husteel is currently generating about -0.06 per unit of volatility. If you would invest  419,500  in Husteel on September 24, 2024 and sell it today you would lose (33,500) from holding Husteel or give up 7.99% of portfolio value over 90 days.

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

Nature and Environment  vs.  Husteel

Nature and Environment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nature and Environment 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.

Husteel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Husteel 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 Nature and Husteel

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

The idea behind Nature and Environment and Husteel 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..