Correlation Between Eq Energy and Hill Street

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

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

Diversification Opportunities for Eq Energy and Hill Street

0.25

Correlation Coefficient

Eq Energy  Hill Street

Modest diversification

The 3 months correlation between EQLB and Hill is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and Hill Street Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hill Street Beverage and Eq Energy 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 Eq Energy Drink are associated (or correlated) with Hill Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hill Street Beverage has no effect on the direction of Eq Energy i.e., Eq Energy and Hill Street go up and down completely randomly.

Pair Corralation between Eq Energy and Hill Street

Given the investment horizon of 90 days Eq Energy Drink is expected to under-perform the Hill Street. In addition to that, Eq Energy is 2.26 times more volatile than Hill Street Beverage. It trades about -0.02 of its total potential returns per unit of risk. Hill Street Beverage is currently generating about -0.04 per unit of volatility. If you would invest  26.00  in Hill Street Beverage on September 4, 2024 and sell it today you would lose (6.00) from holding Hill Street Beverage or give up 23.08% of portfolio value over 90 days.

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

Eq Energy Drink  vs.  Hill Street Beverage

Eq Energy Drink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eq Energy Drink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hill Street Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hill Street Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Eq Energy and Hill Street

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

The idea behind Eq Energy Drink and Hill Street Beverage 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.