Correlation Between Beijer Ref and HMS Networks

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

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

Diversification Opportunities for Beijer Ref and HMS Networks

0.47

Correlation Coefficient

Beijer Ref  HMS Networks

Very weak diversification

The 3 months correlation between Beijer and HMS is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Beijer Ref AB and HMS Networks AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMS Networks AB and Beijer Ref 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 Beijer Ref AB are associated (or correlated) with HMS Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMS Networks AB has no effect on the direction of Beijer Ref i.e., Beijer Ref and HMS Networks go up and down completely randomly.

Pair Corralation between Beijer Ref and HMS Networks

Assuming the 90 days trading horizon Beijer Ref AB is expected to under-perform the HMS Networks. But the stock apears to be less risky and, when comparing its historical volatility, Beijer Ref AB is 1.24 times less risky than HMS Networks. The stock trades about -0.11 of its potential returns per unit of risk. The HMS Networks AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  43,380  in HMS Networks AB on December 30, 2024 and sell it today you would earn a total of  1,780  from holding HMS Networks AB or generate 4.1% return on investment over 90 days.

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

Beijer Ref AB  vs.  HMS Networks AB

Beijer Ref AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beijer Ref AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HMS Networks AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HMS Networks AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HMS Networks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Beijer Ref and HMS Networks

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

The idea behind Beijer Ref AB and HMS Networks AB 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.