Correlation Between Hota Industrial and Eurocharm Holdings

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

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

Diversification Opportunities for Hota Industrial and Eurocharm Holdings

-0.47

Correlation Coefficient

Hota Industrial  Eurocharm Holdings

Very good diversification

The 3 months correlation between Hota and Eurocharm is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Hota Industrial Mfg and Eurocharm Holdings Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eurocharm Holdings and Hota Industrial 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 Hota Industrial Mfg are associated (or correlated) with Eurocharm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eurocharm Holdings has no effect on the direction of Hota Industrial i.e., Hota Industrial and Eurocharm Holdings go up and down completely randomly.

Pair Corralation between Hota Industrial and Eurocharm Holdings

Assuming the 90 days trading horizon Hota Industrial Mfg is expected to under-perform the Eurocharm Holdings. In addition to that, Hota Industrial is 1.4 times more volatile than Eurocharm Holdings Co. It trades about 0.0 of its total potential returns per unit of risk. Eurocharm Holdings Co is currently generating about 0.04 per unit of volatility. If you would invest  15,042  in Eurocharm Holdings Co on September 14, 2024 and sell it today you would earn a total of  4,658  from holding Eurocharm Holdings Co or generate 30.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Hota Industrial Mfg  vs.  Eurocharm Holdings Co

Hota Industrial Mfg

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hota Industrial Mfg are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hota Industrial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Eurocharm Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eurocharm Holdings Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Eurocharm Holdings is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hota Industrial and Eurocharm Holdings

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

The idea behind Hota Industrial Mfg and Eurocharm Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.