Correlation Between Holy Stone and Inventec Corp

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

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

Diversification Opportunities for Holy Stone and Inventec Corp

-0.49

Correlation Coefficient

Holy Stone  Inventec Corp

Very good diversification

The 3 months correlation between Holy and Inventec is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Inventec Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inventec Corp and Holy Stone 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 Holy Stone Enterprise are associated (or correlated) with Inventec Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inventec Corp has no effect on the direction of Holy Stone i.e., Holy Stone and Inventec Corp go up and down completely randomly.

Pair Corralation between Holy Stone and Inventec Corp

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the Inventec Corp. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 2.96 times less risky than Inventec Corp. The stock trades about -0.01 of its potential returns per unit of risk. The Inventec Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,555  in Inventec Corp on October 11, 2024 and sell it today you would earn a total of  2,705  from holding Inventec Corp or generate 105.87% return on investment over 90 days.

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

Holy Stone Enterprise  vs.  Inventec Corp

Holy Stone Enterprise

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holy Stone Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Holy Stone is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Inventec Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Inventec Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Inventec Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holy Stone and Inventec Corp

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

The idea behind Holy Stone Enterprise and Inventec Corp 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.

Check out your portfolio center.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.