Correlation Between HE Equipment and Traws Pharma

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

Diversification Opportunities for HE Equipment and Traws Pharma

-0.51

Correlation Coefficient

HE Equipment  Traws Pharma

Excellent diversification

The 3 months correlation between HEES and Traws is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Traws Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traws Pharma 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 Traws Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traws Pharma has no effect on the direction of HE Equipment i.e., HE Equipment and Traws Pharma go up and down completely randomly.

Pair Corralation between HE Equipment and Traws Pharma

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Traws Pharma. But the stock apears to be less risky and, when comparing its historical volatility, HE Equipment Services is 2.76 times less risky than Traws Pharma. The stock trades about -0.38 of its potential returns per unit of risk. The Traws Pharma is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  446.00  in Traws Pharma on September 23, 2024 and sell it today you would earn a total of  56.00  from holding Traws Pharma or generate 12.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

HE Equipment Services  vs.  Traws Pharma

HE Equipment Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HE Equipment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Traws Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Traws Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with HE Equipment and Traws Pharma

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

The idea behind HE Equipment Services and Traws Pharma 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.