Correlation Between Global Education and HMT

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

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

Diversification Opportunities for Global Education and HMT

0.88

Correlation Coefficient

Global Education  HMT

Very poor diversification

The 3 months correlation between Global and HMT is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Global Education Limited and HMT Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMT Limited and Global Education 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 Global Education Limited are associated (or correlated) with HMT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMT Limited has no effect on the direction of Global Education i.e., Global Education and HMT go up and down completely randomly.

Pair Corralation between Global Education and HMT

Assuming the 90 days trading horizon Global Education Limited is expected to under-perform the HMT. In addition to that, Global Education is 1.24 times more volatile than HMT Limited. It trades about -0.24 of its total potential returns per unit of risk. HMT Limited is currently generating about -0.16 per unit of volatility. If you would invest  6,334  in HMT Limited on December 28, 2024 and sell it today you would lose (1,581) from holding HMT Limited or give up 24.96% of portfolio value over 90 days.

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

Global Education Limited  vs.  HMT Limited

Global Education

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Education Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HMT Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HMT Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Global Education and HMT

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

The idea behind Global Education Limited and HMT Limited 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 Global Correlations module to find global opportunities by holding instruments from different markets.