Correlation Between High Tech and HLB Pharmaceutical

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

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

Diversification Opportunities for High Tech and HLB Pharmaceutical

-0.6

Correlation Coefficient

High Tech  HLB Pharmaceutical

Excellent diversification

The 3 months correlation between High and HLB is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding High Tech Pharm and HLB Pharmaceutical Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HLB Pharmaceutical and High 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 High Tech Pharm are associated (or correlated) with HLB Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HLB Pharmaceutical has no effect on the direction of High Tech i.e., High Tech and HLB Pharmaceutical go up and down completely randomly.

Pair Corralation between High Tech and HLB Pharmaceutical

Assuming the 90 days trading horizon High Tech Pharm is expected to generate 0.5 times more return on investment than HLB Pharmaceutical. However, High Tech Pharm is 1.99 times less risky than HLB Pharmaceutical. It trades about -0.04 of its potential returns per unit of risk. HLB Pharmaceutical Co is currently generating about -0.05 per unit of risk. If you would invest  1,524,000  in High Tech Pharm on August 31, 2024 and sell it today you would lose (115,000) from holding High Tech Pharm or give up 7.55% of portfolio value over 90 days.

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

High Tech Pharm  vs.  HLB Pharmaceutical Co

High Tech Pharm

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days High Tech Pharm 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.

HLB Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HLB Pharmaceutical Co 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with High Tech and HLB Pharmaceutical

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

The idea behind High Tech Pharm and HLB Pharmaceutical 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.