Correlation Between North American and Totally Hip

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

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

Diversification Opportunities for North American and Totally Hip

-0.14

Correlation Coefficient

North American  Totally Hip

Good diversification

The 3 months correlation between North and Totally is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding North American Financial and Totally Hip Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Totally Hip Technologies and North American 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 North American Financial are associated (or correlated) with Totally Hip. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Totally Hip Technologies has no effect on the direction of North American i.e., North American and Totally Hip go up and down completely randomly.

Pair Corralation between North American and Totally Hip

Assuming the 90 days trading horizon North American Financial is expected to generate 0.21 times more return on investment than Totally Hip. However, North American Financial is 4.75 times less risky than Totally Hip. It trades about 0.33 of its potential returns per unit of risk. Totally Hip Technologies is currently generating about -0.13 per unit of risk. If you would invest  553.00  in North American Financial on September 12, 2024 and sell it today you would earn a total of  174.00  from holding North American Financial or generate 31.46% return on investment over 90 days.

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

North American Financial  vs.  Totally Hip Technologies

North American Financial

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in North American Financial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, North American displayed solid returns over the last few months and may actually be approaching a breakup point.

Totally Hip Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Totally Hip Technologies 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 basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with North American and Totally Hip

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

The idea behind North American Financial and Totally Hip Technologies 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.