Correlation Between Hatton National and HVA Foods

Can any of the company-specific risk be diversified away by investing in both Hatton National and HVA Foods 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 HVA Foods 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 HVA Foods PLC, you can compare the effects of market volatilities on Hatton National and HVA Foods 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 HVA Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hatton National and HVA Foods.

Diversification Opportunities for Hatton National and HVA Foods

0.2

Correlation Coefficient

Hatton National  HVA Foods

Modest diversification

The 3 months correlation between Hatton and HVA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hatton National Bank and HVA Foods PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HVA Foods PLC 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 HVA Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HVA Foods PLC has no effect on the direction of Hatton National i.e., Hatton National and HVA Foods go up and down completely randomly.

Pair Corralation between Hatton National and HVA Foods

Assuming the 90 days trading horizon Hatton National Bank is expected to generate 0.6 times more return on investment than HVA Foods. However, Hatton National Bank is 1.67 times less risky than HVA Foods. It trades about 0.09 of its potential returns per unit of risk. HVA Foods PLC is currently generating about -0.08 per unit of risk. If you would invest  28,400  in Hatton National Bank on December 24, 2024 and sell it today you would earn a total of  2,550  from holding Hatton National Bank or generate 8.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.25%
Values	Daily Returns

Hatton National Bank  vs.  HVA Foods PLC

Hatton National Bank

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hatton National Bank are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hatton National may actually be approaching a critical reversion point that can send shares even higher in April 2025.

HVA Foods PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days HVA Foods PLC 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 HVA Foods

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

The idea behind Hatton National Bank and HVA Foods PLC 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.