Correlation Between Aftermaster and Hanover House

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

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

Diversification Opportunities for Aftermaster and Hanover House

0.37

Correlation Coefficient

Aftermaster  Hanover House

Weak diversification

The 3 months correlation between Aftermaster and Hanover is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aftermaster and Hanover House in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover House and Aftermaster 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 Aftermaster are associated (or correlated) with Hanover House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover House has no effect on the direction of Aftermaster i.e., Aftermaster and Hanover House go up and down completely randomly.

Pair Corralation between Aftermaster and Hanover House

Given the investment horizon of 90 days Aftermaster is expected to under-perform the Hanover House. In addition to that, Aftermaster is 1.37 times more volatile than Hanover House. It trades about -0.13 of its total potential returns per unit of risk. Hanover House is currently generating about -0.01 per unit of volatility. If you would invest  0.82  in Hanover House on December 30, 2024 and sell it today you would lose (0.22) from holding Hanover House or give up 26.83% of portfolio value over 90 days.

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

Aftermaster  vs.  Hanover House

Aftermaster

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aftermaster has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hanover House

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hanover House has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Hanover House is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Aftermaster and Hanover House

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

The idea behind Aftermaster and Hanover House 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 Commodity Directory module to find actively traded commodities issued by global exchanges.