Correlation Between Finebesteel and Hironic Co

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

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

Diversification Opportunities for Finebesteel and Hironic Co

-0.64

Correlation Coefficient

Finebesteel  Hironic Co

Excellent diversification

The 3 months correlation between Finebesteel and Hironic is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Finebesteel and Hironic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hironic Co and Finebesteel 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 Finebesteel are associated (or correlated) with Hironic Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hironic Co has no effect on the direction of Finebesteel i.e., Finebesteel and Hironic Co go up and down completely randomly.

Pair Corralation between Finebesteel and Hironic Co

Assuming the 90 days trading horizon Finebesteel is expected to under-perform the Hironic Co. But the stock apears to be less risky and, when comparing its historical volatility, Finebesteel is 2.14 times less risky than Hironic Co. The stock trades about -0.27 of its potential returns per unit of risk. The Hironic Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  633,000  in Hironic Co on September 25, 2024 and sell it today you would lose (3,000) from holding Hironic Co or give up 0.47% of portfolio value over 90 days.

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

Finebesteel  vs.  Hironic Co

Finebesteel

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Finebesteel are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Finebesteel sustained solid returns over the last few months and may actually be approaching a breakup point.

Hironic Co

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Finebesteel and Hironic Co

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

The idea behind Finebesteel and Hironic 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.