Correlation Between Hatton National and E M

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

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

Diversification Opportunities for Hatton National and E M

0.49

Correlation Coefficient

Hatton National  E M

Very weak diversification

The 3 months correlation between Hatton and EMLN0000 is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hatton National Bank 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 Hatton National 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 Hatton National Bank 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 Hatton National i.e., Hatton National and E M go up and down completely randomly.

Pair Corralation between Hatton National and E M

Assuming the 90 days trading horizon Hatton National Bank is expected to generate 0.62 times more return on investment than E M. However, Hatton National Bank is 1.63 times less risky than E M. It trades about 0.05 of its potential returns per unit of risk. E M L is currently generating about -0.09 per unit of risk. If you would invest  30,150  in Hatton National Bank on December 27, 2024 and sell it today you would earn a total of  1,350  from holding Hatton National Bank or generate 4.48% return on investment over 90 days.

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

Hatton National Bank  vs.  E M L

Hatton National Bank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hatton National Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Hatton National 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

Very Weak

Over the last 90 days E M L has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hatton National and E M

The main advantage of trading using opposite Hatton National and E M positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hatton National 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 Hatton National Bank 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.