Correlation Between HE Equipment and 49326EEN9

Can any of the company-specific risk be diversified away by investing in both HE Equipment and 49326EEN9 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 49326EEN9 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 KEY 4789 01 JUN 33, you can compare the effects of market volatilities on HE Equipment and 49326EEN9 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 49326EEN9. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and 49326EEN9.

Diversification Opportunities for HE Equipment and 49326EEN9

0.26

Correlation Coefficient

HE Equipment  49326EEN9

Modest diversification

The 3 months correlation between HEES and 49326EEN9 is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and KEY 4789 01 JUN 33 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KEY 4789 01 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 49326EEN9. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KEY 4789 01 has no effect on the direction of HE Equipment i.e., HE Equipment and 49326EEN9 go up and down completely randomly.

Pair Corralation between HE Equipment and 49326EEN9

Given the investment horizon of 90 days HE Equipment Services is expected to generate 6.36 times more return on investment than 49326EEN9. However, HE Equipment is 6.36 times more volatile than KEY 4789 01 JUN 33. It trades about 0.12 of its potential returns per unit of risk. KEY 4789 01 JUN 33 is currently generating about 0.03 per unit of risk. If you would invest  5,005  in HE Equipment Services on December 24, 2024 and sell it today you would earn a total of  4,498  from holding HE Equipment Services or generate 89.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

HE Equipment Services  vs.  KEY 4789 01 JUN 33

HE Equipment Services

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 9 (%) 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.

KEY 4789 01

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KEY 4789 01 JUN 33 are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 49326EEN9 is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HE Equipment and 49326EEN9

The main advantage of trading using opposite HE Equipment and 49326EEN9 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, 49326EEN9 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 49326EEN9 will offset losses from the drop in 49326EEN9's long position.

The idea behind HE Equipment Services and KEY 4789 01 JUN 33 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.