Correlation Between Holy Stone and Episil Precision

Can any of the company-specific risk be diversified away by investing in both Holy Stone and Episil Precision 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 Episil Precision 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 Episil Precision, you can compare the effects of market volatilities on Holy Stone and Episil Precision 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 Episil Precision. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holy Stone and Episil Precision.

Diversification Opportunities for Holy Stone and Episil Precision

0.79

Correlation Coefficient

Holy Stone  Episil Precision

Poor diversification

The 3 months correlation between Holy and Episil is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Episil Precision in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episil Precision 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 Episil Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episil Precision has no effect on the direction of Holy Stone i.e., Holy Stone and Episil Precision go up and down completely randomly.

Pair Corralation between Holy Stone and Episil Precision

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to generate 0.27 times more return on investment than Episil Precision. However, Holy Stone Enterprise is 3.69 times less risky than Episil Precision. It trades about -0.1 of its potential returns per unit of risk. Episil Precision is currently generating about -0.19 per unit of risk. If you would invest  9,090  in Holy Stone Enterprise on October 25, 2024 and sell it today you would lose (380.00) from holding Holy Stone Enterprise or give up 4.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Holy Stone Enterprise  vs.  Episil Precision

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.

Episil Precision

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Episil Precision has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in February 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Holy Stone and Episil Precision

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

The idea behind Holy Stone Enterprise and Episil Precision 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.