Correlation Between HC and PURA

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

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

Diversification Opportunities for HC and PURA

0.0

Correlation Coefficient

HC  PURA

Pay attention - limited upside

The 3 months correlation between HC and PURA is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HC and PURA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PURA and HC 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 HC are associated (or correlated) with PURA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PURA has no effect on the direction of HC i.e., HC and PURA go up and down completely randomly.

Pair Corralation between HC and PURA

If you would invest  2.39  in HC on December 25, 2024 and sell it today you would lose (0.17) from holding HC or give up 7.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

HC  vs.  PURA

HC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, HC exhibited solid returns over the last few months and may actually be approaching a breakup point.

PURA

Risk-Adjusted Performance

Very Weak

Over the last 90 days PURA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, PURA is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HC and PURA

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

The idea behind HC and PURA 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..