Correlation Between Holy Stone and Alpha Networks

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

Diversification Opportunities for Holy Stone and Alpha Networks

0.42

Correlation Coefficient

Holy Stone  Alpha Networks

Very weak diversification

The 3 months correlation between Holy and Alpha is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and Alpha Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Networks 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 Alpha Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Networks has no effect on the direction of Holy Stone i.e., Holy Stone and Alpha Networks go up and down completely randomly.

Pair Corralation between Holy Stone and Alpha Networks

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the Alpha Networks. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 2.28 times less risky than Alpha Networks. The stock trades about -0.01 of its potential returns per unit of risk. The Alpha Networks is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  3,005  in Alpha Networks on October 11, 2024 and sell it today you would earn a total of  395.00  from holding Alpha Networks or generate 13.14% return on investment over 90 days.

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

Holy Stone Enterprise  vs.  Alpha Networks

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.

Alpha Networks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Networks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Alpha Networks 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 Holy Stone and Alpha Networks

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

The idea behind Holy Stone Enterprise and Alpha Networks 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.