Correlation Between Aldel Financial and HE Equipment

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

By analyzing existing cross correlation between Aldel Financial II and HE Equipment Services, you can compare the effects of market volatilities on Aldel Financial and HE Equipment 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 Aldel Financial with a short position of HE Equipment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aldel Financial and HE Equipment.

Diversification Opportunities for Aldel Financial and HE Equipment

0.19

Correlation Coefficient

Aldel Financial  HE Equipment

Average diversification

The 3 months correlation between Aldel and HEES is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services and Aldel Financial 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 Aldel Financial II are associated (or correlated) with HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Aldel Financial i.e., Aldel Financial and HE Equipment go up and down completely randomly.

Pair Corralation between Aldel Financial and HE Equipment

Given the investment horizon of 90 days Aldel Financial II is expected to generate 0.06 times more return on investment than HE Equipment. However, Aldel Financial II is 15.87 times less risky than HE Equipment. It trades about 0.15 of its potential returns per unit of risk. HE Equipment Services is currently generating about -0.56 per unit of risk. If you would invest  990.00  in Aldel Financial II on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Aldel Financial II or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

Aldel Financial II  vs.  HE Equipment Services

Aldel Financial II

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Aldel Financial and HE Equipment

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

The idea behind Aldel Financial II and HE Equipment Services 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.