Correlation Between Holy Stone and General Interface

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

Diversification Opportunities for Holy Stone and General Interface

0.68
  Correlation Coefficient

Poor diversification

The 3 months correlation between Holy and General is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Holy Stone Enterprise and General Interface Solution in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Interface 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 General Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Interface has no effect on the direction of Holy Stone i.e., Holy Stone and General Interface go up and down completely randomly.

Pair Corralation between Holy Stone and General Interface

Assuming the 90 days trading horizon Holy Stone Enterprise is expected to under-perform the General Interface. But the stock apears to be less risky and, when comparing its historical volatility, Holy Stone Enterprise is 3.34 times less risky than General Interface. The stock trades about -0.14 of its potential returns per unit of risk. The General Interface Solution is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  5,670  in General Interface Solution on October 10, 2024 and sell it today you would lose (320.00) from holding General Interface Solution or give up 5.64% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Holy Stone Enterprise  vs.  General Interface Solution

 Performance 
       Timeline  
Holy Stone Enterprise 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
General Interface 

Risk-Adjusted Performance

0 of 100

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

Holy Stone and General Interface Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Holy Stone and General Interface

The main advantage of trading using opposite Holy Stone and General Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holy Stone position performs unexpectedly, General Interface 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 General Interface will offset losses from the drop in General Interface's long position.
The idea behind Holy Stone Enterprise and General Interface Solution 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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