Correlation Between First Helium and Headwater Exploration

Can any of the company-specific risk be diversified away by investing in both First Helium and Headwater Exploration 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 First Helium and Headwater Exploration into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Helium and Headwater Exploration, you can compare the effects of market volatilities on First Helium and Headwater Exploration 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 First Helium with a short position of Headwater Exploration. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Helium and Headwater Exploration.

Diversification Opportunities for First Helium and Headwater Exploration

0.42

Correlation Coefficient

First Helium  Headwater Exploration

Very weak diversification

The 3 months correlation between First and Headwater is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Helium and Headwater Exploration in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Headwater Exploration and First Helium 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 First Helium are associated (or correlated) with Headwater Exploration. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Headwater Exploration has no effect on the direction of First Helium i.e., First Helium and Headwater Exploration go up and down completely randomly.

Pair Corralation between First Helium and Headwater Exploration

Assuming the 90 days trading horizon First Helium is expected to under-perform the Headwater Exploration. In addition to that, First Helium is 3.51 times more volatile than Headwater Exploration. It trades about -0.02 of its total potential returns per unit of risk. Headwater Exploration is currently generating about 0.0 per unit of volatility. If you would invest  644.00  in Headwater Exploration on December 22, 2024 and sell it today you would lose (6.00) from holding Headwater Exploration or give up 0.93% of portfolio value over 90 days.

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

First Helium  vs.  Headwater Exploration

First Helium

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's essential indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Headwater Exploration

Risk-Adjusted Performance

Very Weak

Over the last 90 days Headwater Exploration has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Headwater Exploration is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Helium and Headwater Exploration

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

The idea behind First Helium and Headwater Exploration 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.