Correlation Between East Africa and HNI Corp

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

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

Diversification Opportunities for East Africa and HNI Corp

-0.08

Correlation Coefficient

East Africa  HNI Corp

Good diversification

The 3 months correlation between East and HNI is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp and East Africa 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 East Africa Metals are associated (or correlated) with HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of East Africa i.e., East Africa and HNI Corp go up and down completely randomly.

Pair Corralation between East Africa and HNI Corp

Assuming the 90 days horizon East Africa Metals is expected to generate 12.92 times more return on investment than HNI Corp. However, East Africa is 12.92 times more volatile than HNI Corp. It trades about 0.06 of its potential returns per unit of risk. HNI Corp is currently generating about 0.07 per unit of risk. If you would invest  7.00  in East Africa Metals on October 8, 2024 and sell it today you would earn a total of  4.00  from holding East Africa Metals or generate 57.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.31%
Values	Daily Returns

East Africa Metals  vs.  HNI Corp

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

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

HNI Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNI Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, HNI Corp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with East Africa and HNI Corp

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

The idea behind East Africa Metals and HNI Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.