Correlation Between Hurum and EO Technics

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

By analyzing existing cross correlation between Hurum Co and EO Technics Co, you can compare the effects of market volatilities on Hurum and EO Technics 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 Hurum with a short position of EO Technics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hurum and EO Technics.

Diversification Opportunities for Hurum and EO Technics

0.6

Correlation Coefficient

Hurum  EO Technics

Poor diversification

The 3 months correlation between Hurum and 039030 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hurum Co and EO Technics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EO Technics and Hurum 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 Hurum Co are associated (or correlated) with EO Technics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EO Technics has no effect on the direction of Hurum i.e., Hurum and EO Technics go up and down completely randomly.

Pair Corralation between Hurum and EO Technics

Assuming the 90 days trading horizon Hurum Co is expected to under-perform the EO Technics. But the stock apears to be less risky and, when comparing its historical volatility, Hurum Co is 2.34 times less risky than EO Technics. The stock trades about -0.01 of its potential returns per unit of risk. The EO Technics Co is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  16,673,000  in EO Technics Co on October 24, 2024 and sell it today you would lose (983,000) from holding EO Technics Co or give up 5.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Hurum Co  vs.  EO Technics Co

Hurum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurum Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hurum is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

EO Technics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EO Technics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, EO Technics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hurum and EO Technics

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

The idea behind Hurum Co and EO Technics Co 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.