Correlation Between HF FOODS and Ring Energy

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

By analyzing existing cross correlation between HF FOODS GRP and Ring Energy, you can compare the effects of market volatilities on HF FOODS and Ring Energy 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 HF FOODS with a short position of Ring Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF FOODS and Ring Energy.

Diversification Opportunities for HF FOODS and Ring Energy

0.24

Correlation Coefficient

HF FOODS  Ring Energy

Modest diversification

The 3 months correlation between 3GX and Ring is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding HF FOODS GRP and Ring Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ring Energy and HF FOODS 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 HF FOODS GRP are associated (or correlated) with Ring Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ring Energy has no effect on the direction of HF FOODS i.e., HF FOODS and Ring Energy go up and down completely randomly.

Pair Corralation between HF FOODS and Ring Energy

Assuming the 90 days horizon HF FOODS GRP is expected to generate 2.07 times more return on investment than Ring Energy. However, HF FOODS is 2.07 times more volatile than Ring Energy. It trades about 0.11 of its potential returns per unit of risk. Ring Energy is currently generating about -0.03 per unit of risk. If you would invest  306.00  in HF FOODS GRP on December 27, 2024 and sell it today you would earn a total of  114.00  from holding HF FOODS GRP or generate 37.25% return on investment over 90 days.

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

HF FOODS GRP  vs.  Ring Energy

HF FOODS GRP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HF FOODS GRP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, HF FOODS reported solid returns over the last few months and may actually be approaching a breakup point.

Ring Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ring Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Ring Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HF FOODS and Ring Energy

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

The idea behind HF FOODS GRP and Ring Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.