Correlation Between Hitech Development and Episurf Medical

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

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

Diversification Opportunities for Hitech Development and Episurf Medical

0.14

Correlation Coefficient

Hitech Development  Episurf Medical

Average diversification

The 3 months correlation between Hitech and Episurf is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Hitech Development Wireless and Episurf Medical AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Episurf Medical AB and Hitech Development 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 Hitech Development Wireless are associated (or correlated) with Episurf Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Episurf Medical AB has no effect on the direction of Hitech Development i.e., Hitech Development and Episurf Medical go up and down completely randomly.

Pair Corralation between Hitech Development and Episurf Medical

Assuming the 90 days trading horizon Hitech Development Wireless is expected to generate 4.42 times more return on investment than Episurf Medical. However, Hitech Development is 4.42 times more volatile than Episurf Medical AB. It trades about 0.03 of its potential returns per unit of risk. Episurf Medical AB is currently generating about 0.05 per unit of risk. If you would invest  0.40  in Hitech Development Wireless on October 5, 2024 and sell it today you would lose (0.23) from holding Hitech Development Wireless or give up 57.5% of portfolio value over 90 days.

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

Hitech Development Wireless  vs.  Episurf Medical AB

Hitech Development

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Hitech Development Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Hitech Development unveiled solid returns over the last few months and may actually be approaching a breakup point.

Episurf Medical AB

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days Episurf Medical AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain forward indicators, Episurf Medical sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hitech Development and Episurf Medical

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

The idea behind Hitech Development Wireless and Episurf Medical AB 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.