Correlation Between HM Inwest and MW Trade

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

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

Diversification Opportunities for HM Inwest and MW Trade

-0.25

Correlation Coefficient

HM Inwest  MW Trade

Very good diversification

The 3 months correlation between HMI and MWT is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding HM Inwest SA and MW Trade SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MW Trade SA and HM Inwest 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 HM Inwest SA are associated (or correlated) with MW Trade. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MW Trade SA has no effect on the direction of HM Inwest i.e., HM Inwest and MW Trade go up and down completely randomly.

Pair Corralation between HM Inwest and MW Trade

Assuming the 90 days trading horizon HM Inwest is expected to generate 1.13 times less return on investment than MW Trade. In addition to that, HM Inwest is 1.12 times more volatile than MW Trade SA. It trades about 0.03 of its total potential returns per unit of risk. MW Trade SA is currently generating about 0.03 per unit of volatility. If you would invest  316.00  in MW Trade SA on December 4, 2024 and sell it today you would earn a total of  10.00  from holding MW Trade SA or generate 3.16% return on investment over 90 days.

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

HM Inwest SA  vs.  MW Trade SA

HM Inwest SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HM Inwest SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HM Inwest may actually be approaching a critical reversion point that can send shares even higher in April 2025.

MW Trade SA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in MW Trade SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, MW Trade may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HM Inwest and MW Trade

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

The idea behind HM Inwest SA and MW Trade SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.