Correlation Between HE Equipment and Vast Renewables

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

Diversification Opportunities for HE Equipment and Vast Renewables

0.11

Correlation Coefficient

HE Equipment  Vast Renewables

Average diversification

The 3 months correlation between HEES and Vast is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Vast Renewables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vast Renewables 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 Vast Renewables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vast Renewables has no effect on the direction of HE Equipment i.e., HE Equipment and Vast Renewables go up and down completely randomly.

Pair Corralation between HE Equipment and Vast Renewables

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Vast Renewables. But the stock apears to be less risky and, when comparing its historical volatility, HE Equipment Services is 4.51 times less risky than Vast Renewables. The stock trades about -0.58 of its potential returns per unit of risk. The Vast Renewables Limited is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Vast Renewables Limited on October 11, 2024 and sell it today you would lose (34.00) from holding Vast Renewables Limited or give up 22.97% of portfolio value over 90 days.

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

HE Equipment Services  vs.  Vast Renewables Limited

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.

Vast Renewables

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vast Renewables Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Vast Renewables exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HE Equipment and Vast Renewables

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

The idea behind HE Equipment Services and Vast Renewables Limited 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 Anywhere module to track or share privately all of your investments from the convenience of any device.