Correlation Between HE Equipment and Aldel Financial

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

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

Diversification Opportunities for HE Equipment and Aldel Financial

0.19

Correlation Coefficient

HE Equipment  Aldel Financial

Average diversification

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

Pair Corralation between HE Equipment and Aldel Financial

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Aldel Financial. In addition to that, HE Equipment is 15.87 times more volatile than Aldel Financial II. It trades about -0.56 of its total potential returns per unit of risk. Aldel Financial II is currently generating about 0.15 per unit of volatility. If you would invest  990.00  in Aldel Financial II on October 11, 2024 and sell it today you would earn a total of  3.00  from holding Aldel Financial II or generate 0.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

HE Equipment Services  vs.  Aldel Financial II

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aldel Financial II

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Aldel Financial is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with HE Equipment and Aldel Financial

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

The idea behind HE Equipment Services and Aldel Financial II 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..