Correlation Between Hilton Metal and Avonmore Capital

Can any of the company-specific risk be diversified away by investing in both Hilton Metal and Avonmore Capital 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 Hilton Metal and Avonmore Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hilton Metal Forging and Avonmore Capital Management, you can compare the effects of market volatilities on Hilton Metal and Avonmore Capital 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 Hilton Metal with a short position of Avonmore Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilton Metal and Avonmore Capital.

Diversification Opportunities for Hilton Metal and Avonmore Capital

0.04

Correlation Coefficient

Hilton Metal  Avonmore Capital

Significant diversification

The 3 months correlation between Hilton and Avonmore is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hilton Metal Forging and Avonmore Capital Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avonmore Capital Man and Hilton Metal 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 Hilton Metal Forging are associated (or correlated) with Avonmore Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avonmore Capital Man has no effect on the direction of Hilton Metal i.e., Hilton Metal and Avonmore Capital go up and down completely randomly.

Pair Corralation between Hilton Metal and Avonmore Capital

Assuming the 90 days trading horizon Hilton Metal Forging is expected to generate 0.84 times more return on investment than Avonmore Capital. However, Hilton Metal Forging is 1.19 times less risky than Avonmore Capital. It trades about 0.06 of its potential returns per unit of risk. Avonmore Capital Management is currently generating about 0.05 per unit of risk. If you would invest  8,313  in Hilton Metal Forging on November 29, 2024 and sell it today you would earn a total of  890.00  from holding Hilton Metal Forging or generate 10.71% return on investment over 90 days.

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

Hilton Metal Forging  vs.  Avonmore Capital Management

Hilton Metal Forging

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hilton Metal Forging are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hilton Metal sustained solid returns over the last few months and may actually be approaching a breakup point.

Avonmore Capital Man

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avonmore Capital Management are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Avonmore Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hilton Metal and Avonmore Capital

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

The idea behind Hilton Metal Forging and Avonmore Capital Management 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.