Correlation Between HMT and V2 Retail

Can any of the company-specific risk be diversified away by investing in both HMT and V2 Retail 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 HMT and V2 Retail into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HMT Limited and V2 Retail Limited, you can compare the effects of market volatilities on HMT and V2 Retail 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 HMT with a short position of V2 Retail. Check out your portfolio center. Please also check ongoing floating volatility patterns of HMT and V2 Retail.

Diversification Opportunities for HMT and V2 Retail

0.45

Correlation Coefficient

HMT  V2 Retail

Very weak diversification

The 3 months correlation between HMT and V2RETAIL is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding HMT Limited and V2 Retail Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on V2 Retail Limited and HMT 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 HMT Limited are associated (or correlated) with V2 Retail. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of V2 Retail Limited has no effect on the direction of HMT i.e., HMT and V2 Retail go up and down completely randomly.

Pair Corralation between HMT and V2 Retail

Assuming the 90 days trading horizon HMT Limited is expected to under-perform the V2 Retail. But the stock apears to be less risky and, when comparing its historical volatility, HMT Limited is 1.27 times less risky than V2 Retail. The stock trades about -0.17 of its potential returns per unit of risk. The V2 Retail Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  160,340  in V2 Retail Limited on December 24, 2024 and sell it today you would earn a total of  9,505  from holding V2 Retail Limited or generate 5.93% return on investment over 90 days.

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

HMT Limited  vs.  V2 Retail Limited

HMT Limited

Risk-Adjusted Performance

Very Weak

Over the last 90 days HMT Limited 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 technical and fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

V2 Retail Limited

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in V2 Retail Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, V2 Retail may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with HMT and V2 Retail

The main advantage of trading using opposite HMT and V2 Retail positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HMT position performs unexpectedly, V2 Retail 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 V2 Retail will offset losses from the drop in V2 Retail's long position.

The idea behind HMT Limited and V2 Retail Limited 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.