Correlation Between H M and H+M HEN+MAUUNSPADR

Can any of the company-specific risk be diversified away by investing in both H M and H+M HEN+MAUUNSPADR 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 H M and H+M HEN+MAUUNSPADR into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H M Hennes and HM HENMAUUNSPADR 15, you can compare the effects of market volatilities on H M and H+M HEN+MAUUNSPADR 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 H M with a short position of H+M HEN+MAUUNSPADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of H M and H+M HEN+MAUUNSPADR.

Diversification Opportunities for H M and H+M HEN+MAUUNSPADR

0.76

Correlation Coefficient

H M  H+M HEN+MAUUNSPADR

Poor diversification

The 3 months correlation between HMSB and H+M is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and HM HENMAUUNSPADR 15 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H+M HEN+MAUUNSPADR and H M 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 H M Hennes are associated (or correlated) with H+M HEN+MAUUNSPADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H+M HEN+MAUUNSPADR has no effect on the direction of H M i.e., H M and H+M HEN+MAUUNSPADR go up and down completely randomly.

Pair Corralation between H M and H+M HEN+MAUUNSPADR

Assuming the 90 days trading horizon H M Hennes is expected to generate 1.2 times more return on investment than H+M HEN+MAUUNSPADR. However, H M is 1.2 times more volatile than HM HENMAUUNSPADR 15. It trades about -0.03 of its potential returns per unit of risk. HM HENMAUUNSPADR 15 is currently generating about -0.04 per unit of risk. If you would invest  1,296  in H M Hennes on December 29, 2024 and sell it today you would lose (66.00) from holding H M Hennes or give up 5.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

H M Hennes  vs.  HM HENMAUUNSPADR 15

H M Hennes

Risk-Adjusted Performance

Very Weak

Over the last 90 days H M Hennes has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, H M is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

H+M HEN+MAUUNSPADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days HM HENMAUUNSPADR 15 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, H+M HEN+MAUUNSPADR is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with H M and H+M HEN+MAUUNSPADR

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

The idea behind H M Hennes and HM HENMAUUNSPADR 15 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.