Correlation Between Hiru and Groove Botanicals

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

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

Diversification Opportunities for Hiru and Groove Botanicals

0.78

Correlation Coefficient

Hiru  Groove Botanicals

Poor diversification

The 3 months correlation between Hiru and Groove is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hiru Corp. and Groove Botanicals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Groove Botanicals and Hiru 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 Hiru Corporation are associated (or correlated) with Groove Botanicals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Groove Botanicals has no effect on the direction of Hiru i.e., Hiru and Groove Botanicals go up and down completely randomly.

Pair Corralation between Hiru and Groove Botanicals

Given the investment horizon of 90 days Hiru Corporation is expected to generate 0.89 times more return on investment than Groove Botanicals. However, Hiru Corporation is 1.12 times less risky than Groove Botanicals. It trades about -0.08 of its potential returns per unit of risk. Groove Botanicals is currently generating about -0.17 per unit of risk. If you would invest  0.28  in Hiru Corporation on September 15, 2024 and sell it today you would lose (0.16) from holding Hiru Corporation or give up 57.14% of portfolio value over 90 days.

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

Hiru Corp.  vs.  Groove Botanicals

Hiru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hiru Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Groove Botanicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Groove Botanicals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Hiru and Groove Botanicals

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

The idea behind Hiru Corporation and Groove Botanicals 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.