Correlation Between Global Standard and HB Technology

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

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

Diversification Opportunities for Global Standard and HB Technology

0.61

Correlation Coefficient

Global Standard  HB Technology

Poor diversification

The 3 months correlation between Global and 078150 is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Global Standard Technology and HB Technology TD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HB Technology TD and Global Standard 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 Global Standard Technology are associated (or correlated) with HB Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HB Technology TD has no effect on the direction of Global Standard i.e., Global Standard and HB Technology go up and down completely randomly.

Pair Corralation between Global Standard and HB Technology

Assuming the 90 days trading horizon Global Standard Technology is expected to generate 1.17 times more return on investment than HB Technology. However, Global Standard is 1.17 times more volatile than HB Technology TD. It trades about -0.03 of its potential returns per unit of risk. HB Technology TD is currently generating about -0.27 per unit of risk. If you would invest  1,577,000  in Global Standard Technology on September 4, 2024 and sell it today you would lose (62,000) from holding Global Standard Technology or give up 3.93% of portfolio value over 90 days.

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

Global Standard Technology  vs.  HB Technology TD

Global Standard Tech

Risk-Adjusted Performance

0 of 100

Very Weak

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

HB Technology TD

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HB Technology TD has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Global Standard and HB Technology

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

The idea behind Global Standard Technology and HB Technology TD 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.