Correlation Between Croda International and HEXPOL AB

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

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

Diversification Opportunities for Croda International and HEXPOL AB

0.59

Correlation Coefficient

Croda International  HEXPOL AB

Very weak diversification

The 3 months correlation between Croda and HEXPOL is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Croda International PLC and HEXPOL AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEXPOL AB and Croda International 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 Croda International PLC are associated (or correlated) with HEXPOL AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEXPOL AB has no effect on the direction of Croda International i.e., Croda International and HEXPOL AB go up and down completely randomly.

Pair Corralation between Croda International and HEXPOL AB

Assuming the 90 days horizon Croda International PLC is expected to under-perform the HEXPOL AB. But the pink sheet apears to be less risky and, when comparing its historical volatility, Croda International PLC is 1.2 times less risky than HEXPOL AB. The pink sheet trades about -0.06 of its potential returns per unit of risk. The HEXPOL AB is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,093  in HEXPOL AB on October 3, 2024 and sell it today you would lose (127.00) from holding HEXPOL AB or give up 11.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.15%
Values	Daily Returns

Croda International PLC  vs.  HEXPOL AB

Croda International PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Croda International PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HEXPOL AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HEXPOL AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, HEXPOL AB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Croda International and HEXPOL AB

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

The idea behind Croda International PLC and HEXPOL 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.