Correlation Between SS TECH and HuMC

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

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

Diversification Opportunities for SS TECH and HuMC

0.28

Correlation Coefficient

SS TECH  HuMC

Modest diversification

The 3 months correlation between 101490 and HuMC is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SS TECH and HuMC Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HuMC and SS TECH 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 SS TECH are associated (or correlated) with HuMC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HuMC has no effect on the direction of SS TECH i.e., SS TECH and HuMC go up and down completely randomly.

Pair Corralation between SS TECH and HuMC

Assuming the 90 days trading horizon SS TECH is expected to generate 2.31 times more return on investment than HuMC. However, SS TECH is 2.31 times more volatile than HuMC Co. It trades about 0.19 of its potential returns per unit of risk. HuMC Co is currently generating about -0.03 per unit of risk. If you would invest  2,231,637  in SS TECH on November 29, 2024 and sell it today you would earn a total of  823,363  from holding SS TECH or generate 36.9% return on investment over 90 days.

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

SS TECH  vs.  HuMC Co

SS TECH

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SS TECH are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SS TECH sustained solid returns over the last few months and may actually be approaching a breakup point.

HuMC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with SS TECH and HuMC

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

The idea behind SS TECH and HuMC 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.