Correlation Between EMERCOIN and HC

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

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

Diversification Opportunities for EMERCOIN and HC

0.66

Correlation Coefficient

EMERCOIN  HC

Poor diversification

The 3 months correlation between EMERCOIN and HC is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding EMERCOIN and HC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HC and EMERCOIN 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 EMERCOIN are associated (or correlated) with HC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HC has no effect on the direction of EMERCOIN i.e., EMERCOIN and HC go up and down completely randomly.

Pair Corralation between EMERCOIN and HC

Assuming the 90 days trading horizon EMERCOIN is expected to generate 42.64 times less return on investment than HC. But when comparing it to its historical volatility, EMERCOIN is 4.01 times less risky than HC. It trades about 0.01 of its potential returns per unit of risk. HC is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  2.34  in HC on December 30, 2024 and sell it today you would lose (0.25) from holding HC or give up 10.68% of portfolio value over 90 days.

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

EMERCOIN  vs.  HC

EMERCOIN

Risk-Adjusted Performance

Very Weak

Over the last 90 days EMERCOIN has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly unsteady fundamental indicators, EMERCOIN demonstrated solid returns over the last few months and may actually be approaching a breakup point.

HC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, HC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EMERCOIN and HC

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

The idea behind EMERCOIN and HC 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.