Correlation Between Armada Hflr and WisdomTree STOXX

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

By analyzing existing cross correlation between Armada Hflr Pr and WisdomTree STOXX Europe, you can compare the effects of market volatilities on Armada Hflr and WisdomTree STOXX 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 Armada Hflr with a short position of WisdomTree STOXX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hflr and WisdomTree STOXX.

Diversification Opportunities for Armada Hflr and WisdomTree STOXX

0.32

Correlation Coefficient

Armada Hflr  WisdomTree STOXX

Weak diversification

The 3 months correlation between Armada and WisdomTree is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and WisdomTree STOXX Europe in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WisdomTree STOXX Europe and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with WisdomTree STOXX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WisdomTree STOXX Europe has no effect on the direction of Armada Hflr i.e., Armada Hflr and WisdomTree STOXX go up and down completely randomly.

Pair Corralation between Armada Hflr and WisdomTree STOXX

Considering the 90-day investment horizon Armada Hflr Pr is expected to under-perform the WisdomTree STOXX. But the stock apears to be less risky and, when comparing its historical volatility, Armada Hflr Pr is 1.58 times less risky than WisdomTree STOXX. The stock trades about -0.12 of its potential returns per unit of risk. The WisdomTree STOXX Europe is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  2,053  in WisdomTree STOXX Europe on September 20, 2024 and sell it today you would lose (133.00) from holding WisdomTree STOXX Europe or give up 6.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Armada Hflr Pr  vs.  WisdomTree STOXX Europe

Armada Hflr Pr

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armada Hflr Pr has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

WisdomTree STOXX Europe

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Armada Hflr and WisdomTree STOXX

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

The idea behind Armada Hflr Pr and WisdomTree STOXX Europe 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.