Correlation Between Hardide PLC and Malvern International

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

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

Diversification Opportunities for Hardide PLC and Malvern International

-0.09

Correlation Coefficient

Hardide PLC  Malvern International

Good diversification

The 3 months correlation between Hardide and Malvern is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Hardide PLC and Malvern International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Malvern International and Hardide PLC 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 Hardide PLC are associated (or correlated) with Malvern International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Malvern International has no effect on the direction of Hardide PLC i.e., Hardide PLC and Malvern International go up and down completely randomly.

Pair Corralation between Hardide PLC and Malvern International

Assuming the 90 days trading horizon Hardide PLC is expected to under-perform the Malvern International. But the stock apears to be less risky and, when comparing its historical volatility, Hardide PLC is 1.2 times less risky than Malvern International. The stock trades about -0.14 of its potential returns per unit of risk. The Malvern International is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,900  in Malvern International on August 30, 2024 and sell it today you would earn a total of  250.00  from holding Malvern International or generate 13.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Hardide PLC  vs.  Malvern International

Hardide PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hardide PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Malvern International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Malvern International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Malvern International unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hardide PLC and Malvern International

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

The idea behind Hardide PLC and Malvern International 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.

Check out your portfolio center.

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.