Correlation Between Heartbeam Warrant and Locafy

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

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

Diversification Opportunities for Heartbeam Warrant and Locafy

-0.12

Correlation Coefficient

Heartbeam Warrant  Locafy

Good diversification

The 3 months correlation between Heartbeam and Locafy is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Heartbeam Warrant and Locafy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Locafy Limited and Heartbeam Warrant 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 Heartbeam Warrant are associated (or correlated) with Locafy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Locafy Limited has no effect on the direction of Heartbeam Warrant i.e., Heartbeam Warrant and Locafy go up and down completely randomly.

Pair Corralation between Heartbeam Warrant and Locafy

Assuming the 90 days horizon Heartbeam Warrant is expected to under-perform the Locafy. But the stock apears to be less risky and, when comparing its historical volatility, Heartbeam Warrant is 3.25 times less risky than Locafy. The stock trades about -0.01 of its potential returns per unit of risk. The Locafy Limited is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,670  in Locafy Limited on December 30, 2024 and sell it today you would lose (1,180) from holding Locafy Limited or give up 70.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.64%
Values	Daily Returns

Heartbeam Warrant  vs.  Locafy Limited

Heartbeam Warrant

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heartbeam Warrant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Heartbeam Warrant is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Locafy Limited

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Locafy Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Locafy showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Heartbeam Warrant and Locafy

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

The idea behind Heartbeam Warrant and Locafy Limited 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.