Correlation Between Innometry and HSD Engine

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

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

Diversification Opportunities for Innometry and HSD Engine

-0.74

Correlation Coefficient

Innometry  HSD Engine

Pay attention - limited upside

The 3 months correlation between Innometry and HSD is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Innometry Co and HSD Engine Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HSD Engine and Innometry 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 Innometry Co are associated (or correlated) with HSD Engine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HSD Engine has no effect on the direction of Innometry i.e., Innometry and HSD Engine go up and down completely randomly.

Pair Corralation between Innometry and HSD Engine

Assuming the 90 days trading horizon Innometry Co is expected to under-perform the HSD Engine. But the stock apears to be less risky and, when comparing its historical volatility, Innometry Co is 1.15 times less risky than HSD Engine. The stock trades about -0.16 of its potential returns per unit of risk. The HSD Engine Co is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,201,000  in HSD Engine Co on September 5, 2024 and sell it today you would earn a total of  386,000  from holding HSD Engine Co or generate 32.14% return on investment over 90 days.

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

Innometry Co  vs.  HSD Engine Co

Innometry

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innometry 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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HSD Engine

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HSD Engine Co are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HSD Engine sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innometry and HSD Engine

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

The idea behind Innometry Co and HSD Engine 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.