Correlation Between HMS Networks and CellaVision

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

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

Diversification Opportunities for HMS Networks and CellaVision

-0.46

Correlation Coefficient

HMS Networks  CellaVision

Very good diversification

The 3 months correlation between HMS and CellaVision is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding HMS Networks AB and CellaVision AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CellaVision AB and HMS Networks 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 HMS Networks AB are associated (or correlated) with CellaVision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CellaVision AB has no effect on the direction of HMS Networks i.e., HMS Networks and CellaVision go up and down completely randomly.

Pair Corralation between HMS Networks and CellaVision

Assuming the 90 days trading horizon HMS Networks AB is expected to generate 0.95 times more return on investment than CellaVision. However, HMS Networks AB is 1.06 times less risky than CellaVision. It trades about 0.17 of its potential returns per unit of risk. CellaVision AB is currently generating about -0.1 per unit of risk. If you would invest  39,020  in HMS Networks AB on November 29, 2024 and sell it today you would earn a total of  10,220  from holding HMS Networks AB or generate 26.19% return on investment over 90 days.

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

HMS Networks AB  vs.  CellaVision AB

HMS Networks AB

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HMS Networks AB are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HMS Networks unveiled solid returns over the last few months and may actually be approaching a breakup point.

CellaVision AB

Risk-Adjusted Performance

Very Weak

Over the last 90 days CellaVision AB 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 March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HMS Networks and CellaVision

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

The idea behind HMS Networks AB and CellaVision AB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.