Correlation Between HCI and Hallmark Financial

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

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

Diversification Opportunities for HCI and Hallmark Financial

-0.19

Correlation Coefficient

HCI  Hallmark Financial

Good diversification

The 3 months correlation between HCI and Hallmark is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding HCI Group and Hallmark Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hallmark Financial and HCI 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 HCI Group are associated (or correlated) with Hallmark Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hallmark Financial has no effect on the direction of HCI i.e., HCI and Hallmark Financial go up and down completely randomly.

Pair Corralation between HCI and Hallmark Financial

Considering the 90-day investment horizon HCI Group is expected to generate 0.46 times more return on investment than Hallmark Financial. However, HCI Group is 2.2 times less risky than Hallmark Financial. It trades about 0.08 of its potential returns per unit of risk. Hallmark Financial Services is currently generating about -0.04 per unit of risk. If you would invest  4,893  in HCI Group on October 10, 2024 and sell it today you would earn a total of  6,399  from holding HCI Group or generate 130.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	22.62%
Values	Daily Returns

HCI Group  vs.  Hallmark Financial Services

HCI Group

Risk-Adjusted Performance

1 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HCI Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, HCI is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Hallmark Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hallmark Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Hallmark Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with HCI and Hallmark Financial

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

The idea behind HCI Group and Hallmark Financial Services 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.