Correlation Between Boralex and Heroux Devtek

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

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

Diversification Opportunities for Boralex and Heroux Devtek

0.56

Correlation Coefficient

Boralex  Heroux Devtek

Very weak diversification

The 3 months correlation between Boralex and Heroux is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Boralex and Heroux Devtek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heroux Devtek and Boralex 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 Boralex are associated (or correlated) with Heroux Devtek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heroux Devtek has no effect on the direction of Boralex i.e., Boralex and Heroux Devtek go up and down completely randomly.

Pair Corralation between Boralex and Heroux Devtek

Assuming the 90 days trading horizon Boralex is expected to under-perform the Heroux Devtek. In addition to that, Boralex is 5.47 times more volatile than Heroux Devtek. It trades about -0.03 of its total potential returns per unit of risk. Heroux Devtek is currently generating about 0.09 per unit of volatility. If you would invest  3,135  in Heroux Devtek on September 4, 2024 and sell it today you would earn a total of  51.00  from holding Heroux Devtek or generate 1.63% return on investment over 90 days.

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

Boralex  vs.  Heroux Devtek

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Boralex is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Heroux Devtek

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heroux Devtek are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Heroux Devtek is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Boralex and Heroux Devtek

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

The idea behind Boralex and Heroux Devtek 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..