Correlation Between Caldwell Partners and Hammond Power

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

By analyzing existing cross correlation between Caldwell Partners International and Hammond Power Solutions, you can compare the effects of market volatilities on Caldwell Partners and Hammond Power 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 Caldwell Partners with a short position of Hammond Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caldwell Partners and Hammond Power.

Diversification Opportunities for Caldwell Partners and Hammond Power

0.23

Correlation Coefficient

Caldwell Partners  Hammond Power

Modest diversification

The 3 months correlation between Caldwell and Hammond is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Caldwell Partners Internationa and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions and Caldwell Partners 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 Caldwell Partners International are associated (or correlated) with Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Caldwell Partners i.e., Caldwell Partners and Hammond Power go up and down completely randomly.

Pair Corralation between Caldwell Partners and Hammond Power

Assuming the 90 days trading horizon Caldwell Partners International is expected to generate 1.08 times more return on investment than Hammond Power. However, Caldwell Partners is 1.08 times more volatile than Hammond Power Solutions. It trades about 0.05 of its potential returns per unit of risk. Hammond Power Solutions is currently generating about 0.04 per unit of risk. If you would invest  105.00  in Caldwell Partners International on September 13, 2024 and sell it today you would earn a total of  8.00  from holding Caldwell Partners International or generate 7.62% return on investment over 90 days.

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

Caldwell Partners Internationa  vs.  Hammond Power Solutions

Caldwell Partners

Risk-Adjusted Performance

4 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caldwell Partners International are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Caldwell Partners may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Hammond Power Solutions

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hammond Power Solutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hammond Power may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Caldwell Partners and Hammond Power

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

The idea behind Caldwell Partners International and Hammond Power Solutions 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.