Correlation Between Hafnia and Hoegh Autoliners

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

By analyzing existing cross correlation between Hafnia and Hoegh Autoliners ASA, you can compare the effects of market volatilities on Hafnia and Hoegh Autoliners 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 Hoegh Autoliners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hafnia and Hoegh Autoliners.

Diversification Opportunities for Hafnia and Hoegh Autoliners

0.64

Correlation Coefficient

Hafnia  Hoegh Autoliners

Poor diversification

The 3 months correlation between Hafnia and Hoegh is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hafnia and Hoegh Autoliners ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hoegh Autoliners ASA 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 are associated (or correlated) with Hoegh Autoliners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hoegh Autoliners ASA has no effect on the direction of Hafnia i.e., Hafnia and Hoegh Autoliners go up and down completely randomly.

Pair Corralation between Hafnia and Hoegh Autoliners

Assuming the 90 days trading horizon Hafnia is expected to generate 2.11 times less return on investment than Hoegh Autoliners. But when comparing it to its historical volatility, Hafnia is 1.44 times less risky than Hoegh Autoliners. It trades about 0.06 of its potential returns per unit of risk. Hoegh Autoliners ASA is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  3,639  in Hoegh Autoliners ASA on October 10, 2024 and sell it today you would earn a total of  7,541  from holding Hoegh Autoliners ASA or generate 207.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.59%
Values	Daily Returns

Hafnia  vs.  Hoegh Autoliners ASA

Hafnia

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hoegh Autoliners ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hoegh Autoliners ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hoegh Autoliners is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hafnia and Hoegh Autoliners

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

The idea behind Hafnia and Hoegh Autoliners ASA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.