Correlation Between Holy Stone and AzureWave Technologies

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

Diversification Opportunities for Holy Stone and AzureWave Technologies

-0.64

Correlation Coefficient

Holy Stone  AzureWave Technologies

Excellent diversification

The 3 months correlation between Holy and AzureWave is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and AzureWave Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AzureWave Technologies 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 AzureWave Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AzureWave Technologies has no effect on the direction of Holy Stone i.e., Holy Stone and AzureWave Technologies go up and down completely randomly.

Pair Corralation between Holy Stone and AzureWave Technologies

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the AzureWave Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 3.26 times less risky than AzureWave Technologies. The stock trades about -0.01 of its potential returns per unit of risk. The AzureWave Technologies is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,010  in AzureWave Technologies on October 9, 2024 and sell it today you would earn a total of  3,700  from holding AzureWave Technologies or generate 184.08% return on investment over 90 days.

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

Holy Stone Enterprise  vs.  AzureWave Technologies

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 latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

AzureWave Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AzureWave Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, AzureWave Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Holy Stone and AzureWave Technologies

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

The idea behind Holy Stone Enterprise and AzureWave Technologies 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.