Correlation Between HNB Finance and E M

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

By analyzing existing cross correlation between HNB Finance and E M L, you can compare the effects of market volatilities on HNB Finance and E M 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 HNB Finance with a short position of E M. Check out your portfolio center. Please also check ongoing floating volatility patterns of HNB Finance and E M.

Diversification Opportunities for HNB Finance and E M

-0.43

Correlation Coefficient

HNB Finance  E M

Very good diversification

The 3 months correlation between HNB and EMLN0000 is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding HNB Finance and E M L in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on E M L and HNB Finance 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 HNB Finance are associated (or correlated) with E M. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of E M L has no effect on the direction of HNB Finance i.e., HNB Finance and E M go up and down completely randomly.

Pair Corralation between HNB Finance and E M

Assuming the 90 days trading horizon HNB Finance is expected to under-perform the E M. In addition to that, HNB Finance is 1.14 times more volatile than E M L. It trades about 0.0 of its total potential returns per unit of risk. E M L is currently generating about 0.04 per unit of volatility. If you would invest  360.00  in E M L on September 24, 2024 and sell it today you would earn a total of  20.00  from holding E M L or generate 5.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

HNB Finance  vs.  E M L

HNB Finance

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HNB Finance has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HNB Finance is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

E M L

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with HNB Finance and E M

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

The idea behind HNB Finance and E M L 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.