Correlation Between Hites SA and Ripley Corp

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

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

Diversification Opportunities for Hites SA and Ripley Corp

0.44

Correlation Coefficient

Hites SA  Ripley Corp

Very weak diversification

The 3 months correlation between Hites and Ripley is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Hites SA and Ripley Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ripley Corp and Hites SA 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 Hites SA are associated (or correlated) with Ripley Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ripley Corp has no effect on the direction of Hites SA i.e., Hites SA and Ripley Corp go up and down completely randomly.

Pair Corralation between Hites SA and Ripley Corp

Assuming the 90 days trading horizon Hites SA is expected to generate 14.61 times less return on investment than Ripley Corp. In addition to that, Hites SA is 1.74 times more volatile than Ripley Corp. It trades about 0.01 of its total potential returns per unit of risk. Ripley Corp is currently generating about 0.23 per unit of volatility. If you would invest  27,055  in Ripley Corp on December 4, 2024 and sell it today you would earn a total of  4,043  from holding Ripley Corp or generate 14.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.72%
Values	Daily Returns

Hites SA  vs.  Ripley Corp

Hites SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hites SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hites SA is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Ripley Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ripley Corp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Ripley Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hites SA and Ripley Corp

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

The idea behind Hites SA and Ripley Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.