Correlation Between Hitech Development and Evolution

Can any of the company-specific risk be diversified away by investing in both Hitech Development and Evolution 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 Evolution 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 Evolution AB, you can compare the effects of market volatilities on Hitech Development and Evolution 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 Evolution. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hitech Development and Evolution.

Diversification Opportunities for Hitech Development and Evolution

0.62

Correlation Coefficient

Hitech Development  Evolution

Poor diversification

The 3 months correlation between Hitech and Evolution is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hitech Development Wireless and Evolution AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Evolution 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 Evolution. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Evolution AB has no effect on the direction of Hitech Development i.e., Hitech Development and Evolution go up and down completely randomly.

Pair Corralation between Hitech Development and Evolution

Assuming the 90 days trading horizon Hitech Development Wireless is expected to generate 9.48 times more return on investment than Evolution. However, Hitech Development is 9.48 times more volatile than Evolution AB. It trades about 0.03 of its potential returns per unit of risk. Evolution AB is currently generating about -0.07 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	Significant
Accuracy	100.0%
Values	Daily Returns

Hitech Development Wireless  vs.  Evolution 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.

Evolution AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Evolution AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Hitech Development and Evolution

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

The idea behind Hitech Development Wireless and Evolution 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.