Correlation Between Heroux Devtek and Boralex

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

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

Diversification Opportunities for Heroux Devtek and Boralex

0.56

Correlation Coefficient

Heroux Devtek  Boralex

Very weak diversification

The 3 months correlation between Heroux and Boralex is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Heroux Devtek and Boralex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boralex and Heroux Devtek 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 Heroux Devtek are associated (or correlated) with Boralex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boralex has no effect on the direction of Heroux Devtek i.e., Heroux Devtek and Boralex go up and down completely randomly.

Pair Corralation between Heroux Devtek and Boralex

Assuming the 90 days trading horizon Heroux Devtek is expected to generate 1.17 times more return on investment than Boralex. However, Heroux Devtek is 1.17 times more volatile than Boralex. It trades about 0.15 of its potential returns per unit of risk. Boralex is currently generating about 0.0 per unit of risk. If you would invest  1,564  in Heroux Devtek on September 4, 2024 and sell it today you would earn a total of  1,622  from holding Heroux Devtek or generate 103.71% return on investment over 90 days.

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

Heroux Devtek  vs.  Boralex

Heroux Devtek

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heroux Devtek are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Heroux Devtek is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Boralex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boralex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Boralex is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Heroux Devtek and Boralex

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

The idea behind Heroux Devtek and Boralex 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.