Correlation Between HE Equipment and Distoken Acquisition

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

Diversification Opportunities for HE Equipment and Distoken Acquisition

0.82

Correlation Coefficient

HE Equipment  Distoken Acquisition

Very poor diversification

The 3 months correlation between HEES and Distoken is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Distoken Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distoken Acquisition 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 Distoken Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distoken Acquisition has no effect on the direction of HE Equipment i.e., HE Equipment and Distoken Acquisition go up and down completely randomly.

Pair Corralation between HE Equipment and Distoken Acquisition

Given the investment horizon of 90 days HE Equipment Services is expected to generate 5.95 times more return on investment than Distoken Acquisition. However, HE Equipment is 5.95 times more volatile than Distoken Acquisition. It trades about 0.19 of its potential returns per unit of risk. Distoken Acquisition is currently generating about 0.12 per unit of risk. If you would invest  4,255  in HE Equipment Services on September 12, 2024 and sell it today you would earn a total of  1,416  from holding HE Equipment Services or generate 33.28% return on investment over 90 days.

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

HE Equipment Services  vs.  Distoken Acquisition

HE Equipment Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Distoken Acquisition

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Distoken Acquisition are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Distoken Acquisition is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with HE Equipment and Distoken Acquisition

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

The idea behind HE Equipment Services and Distoken Acquisition 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.