Correlation Between Fine Besteel and Hironic

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

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

Diversification Opportunities for Fine Besteel and Hironic

-0.53

Correlation Coefficient

Fine Besteel  Hironic

Excellent diversification

The 3 months correlation between Fine and Hironic is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Fine Besteel Co and Hironic Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hironic and Fine Besteel 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 Fine Besteel Co are associated (or correlated) with Hironic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hironic has no effect on the direction of Fine Besteel i.e., Fine Besteel and Hironic go up and down completely randomly.

Pair Corralation between Fine Besteel and Hironic

Assuming the 90 days trading horizon Fine Besteel Co is expected to generate 0.89 times more return on investment than Hironic. However, Fine Besteel Co is 1.13 times less risky than Hironic. It trades about 0.02 of its potential returns per unit of risk. Hironic Co is currently generating about 0.01 per unit of risk. If you would invest  91,200  in Fine Besteel Co on October 8, 2024 and sell it today you would earn a total of  1,400  from holding Fine Besteel Co or generate 1.54% return on investment over 90 days.

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

Fine Besteel Co  vs.  Hironic Co

Fine Besteel

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fine Besteel Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fine Besteel is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hironic

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 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fine Besteel and Hironic

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

The idea behind Fine Besteel Co 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.