Correlation Between Hosken Consolidated and Adcorp

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

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

Diversification Opportunities for Hosken Consolidated and Adcorp

0.4

Correlation Coefficient

Hosken Consolidated  Adcorp

Very weak diversification

The 3 months correlation between Hosken and Adcorp is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Hosken Consolidated Investment and Adcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adcorp and Hosken Consolidated 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 Hosken Consolidated Investments are associated (or correlated) with Adcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adcorp has no effect on the direction of Hosken Consolidated i.e., Hosken Consolidated and Adcorp go up and down completely randomly.

Pair Corralation between Hosken Consolidated and Adcorp

Assuming the 90 days trading horizon Hosken Consolidated Investments is expected to under-perform the Adcorp. But the stock apears to be less risky and, when comparing its historical volatility, Hosken Consolidated Investments is 1.69 times less risky than Adcorp. The stock trades about -0.18 of its potential returns per unit of risk. The Adcorp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  50,000  in Adcorp on October 25, 2024 and sell it today you would lose (3,600) from holding Adcorp or give up 7.2% of portfolio value over 90 days.

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

Hosken Consolidated Investment  vs.  Adcorp

Hosken Consolidated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hosken Consolidated Investments 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 rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Adcorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Hosken Consolidated and Adcorp

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

The idea behind Hosken Consolidated Investments and Adcorp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.