Correlation Between HTBI Old and First Capital

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

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

Diversification Opportunities for HTBI Old and First Capital

0.13

Correlation Coefficient

HTBI Old  First Capital

Average diversification

The 3 months correlation between HTBI and First is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding HTBI Old and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and HTBI Old 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 HTBI Old are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of HTBI Old i.e., HTBI Old and First Capital go up and down completely randomly.

Pair Corralation between HTBI Old and First Capital

Given the investment horizon of 90 days HTBI Old is expected to generate 1.35 times less return on investment than First Capital. But when comparing it to its historical volatility, HTBI Old is 1.01 times less risky than First Capital. It trades about 0.14 of its potential returns per unit of risk. First Capital is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,176  in First Capital on December 29, 2024 and sell it today you would earn a total of  634.00  from holding First Capital or generate 19.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	60.66%
Values	Daily Returns

HTBI Old  vs.  First Capital

HTBI Old

Risk-Adjusted Performance

OK

Over the last 90 days HTBI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile fundamental drivers, HTBI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HTBI Old and First Capital

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

The idea behind HTBI Old and First Capital 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..