Correlation Between HH International and RTX AS

Can any of the company-specific risk be diversified away by investing in both HH International and RTX AS 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 HH International and RTX AS into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for HH International and RTX AS

0.33

Correlation Coefficient

HH International  RTX AS

Weak diversification

The 3 months correlation between HH International and RTX is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding HH International AS and RTX AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RTX AS and HH International 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 HH International AS are associated (or correlated) with RTX AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RTX AS has no effect on the direction of HH International i.e., HH International and RTX AS go up and down completely randomly.

Pair Corralation between HH International and RTX AS

Assuming the 90 days horizon HH International AS is expected to generate 0.71 times more return on investment than RTX AS. However, HH International AS is 1.42 times less risky than RTX AS. It trades about 0.21 of its potential returns per unit of risk. RTX AS is currently generating about 0.04 per unit of risk. If you would invest  7,960  in HH International AS on December 2, 2024 and sell it today you would earn a total of  2,000  from holding HH International AS or generate 25.13% return on investment over 90 days.

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

HH International AS  vs.  RTX AS

HH International

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HH International AS are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, HH International displayed solid returns over the last few months and may actually be approaching a breakup point.

RTX AS

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RTX AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, RTX AS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with HH International and RTX AS

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

The idea behind HH International AS and RTX AS 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.