Correlation Between Hafnia and Everest

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

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

Diversification Opportunities for Hafnia and Everest

0.6

Correlation Coefficient

Hafnia  Everest

Poor diversification

The 3 months correlation between Hafnia and Everest is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Hafnia Limited and Everest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Group and Hafnia 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 Hafnia Limited are associated (or correlated) with Everest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Group has no effect on the direction of Hafnia i.e., Hafnia and Everest go up and down completely randomly.

Pair Corralation between Hafnia and Everest

Given the investment horizon of 90 days Hafnia Limited is expected to under-perform the Everest. In addition to that, Hafnia is 1.21 times more volatile than Everest Group. It trades about -0.17 of its total potential returns per unit of risk. Everest Group is currently generating about 0.0 per unit of volatility. If you would invest  39,122  in Everest Group on September 3, 2024 and sell it today you would lose (366.00) from holding Everest Group or give up 0.94% of portfolio value over 90 days.

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

Hafnia Limited  vs.  Everest Group

Hafnia Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hafnia Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Everest Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hafnia and Everest

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

The idea behind Hafnia Limited and Everest Group 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.