Correlation Between H M and Xcel Brands

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

Diversification Opportunities for H M and Xcel Brands

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between HNNMY and Xcel is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and Xcel Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xcel Brands 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 Xcel Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xcel Brands has no effect on the direction of H M i.e., H M and Xcel Brands go up and down completely randomly.

Pair Corralation between H M and Xcel Brands

Assuming the 90 days horizon H M Hennes is expected to under-perform the Xcel Brands. But the pink sheet apears to be less risky and, when comparing its historical volatility, H M Hennes is 1.73 times less risky than Xcel Brands. The pink sheet trades about -0.1 of its potential returns per unit of risk. The Xcel Brands is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  70.00  in Xcel Brands on August 30, 2024 and sell it today you would lose (1.00) from holding Xcel Brands or give up 1.43% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

H M Hennes  vs.  Xcel Brands

 Performance 
       Timeline  
H M Hennes 

Risk-Adjusted Performance

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Weak
 
Strong
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 latest unsteady performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
Xcel Brands 

Risk-Adjusted Performance

0 of 100

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

H M and Xcel Brands Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with H M and Xcel Brands

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

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