Correlation Between HE Equipment and Western Acquisition

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

Diversification Opportunities for HE Equipment and Western Acquisition

-0.13

Correlation Coefficient

HE Equipment  Western Acquisition

Good diversification

The 3 months correlation between HEES and Western is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Western Acquisition Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western 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 Western Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Acquisition has no effect on the direction of HE Equipment i.e., HE Equipment and Western Acquisition go up and down completely randomly.

Pair Corralation between HE Equipment and Western Acquisition

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Western Acquisition. In addition to that, HE Equipment is 1.05 times more volatile than Western Acquisition Ventures. It trades about -0.62 of its total potential returns per unit of risk. Western Acquisition Ventures is currently generating about 0.3 per unit of volatility. If you would invest  1,090  in Western Acquisition Ventures on October 12, 2024 and sell it today you would earn a total of  129.00  from holding Western Acquisition Ventures or generate 11.83% return on investment over 90 days.

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

HE Equipment Services  vs.  Western Acquisition Ventures

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 weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Western Acquisition

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Acquisition Ventures are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Western Acquisition may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HE Equipment and Western Acquisition

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

The idea behind HE Equipment Services and Western Acquisition Ventures 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.