Correlation Between HubSpot and Howmet Aerospace

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

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

Diversification Opportunities for HubSpot and Howmet Aerospace

0.92

Correlation Coefficient

HubSpot  Howmet Aerospace

Almost no diversification

The 3 months correlation between HubSpot and Howmet is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding HubSpot and Howmet Aerospace in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Howmet Aerospace and HubSpot 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 HubSpot are associated (or correlated) with Howmet Aerospace. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Howmet Aerospace has no effect on the direction of HubSpot i.e., HubSpot and Howmet Aerospace go up and down completely randomly.

Pair Corralation between HubSpot and Howmet Aerospace

Given the investment horizon of 90 days HubSpot is expected to generate 1.33 times more return on investment than Howmet Aerospace. However, HubSpot is 1.33 times more volatile than Howmet Aerospace. It trades about 0.01 of its potential returns per unit of risk. Howmet Aerospace is currently generating about -0.15 per unit of risk. If you would invest  72,000  in HubSpot on September 22, 2024 and sell it today you would lose (100.00) from holding HubSpot or give up 0.14% of portfolio value over 90 days.

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

HubSpot  vs.  Howmet Aerospace

HubSpot

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in HubSpot are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal fundamental drivers, HubSpot unveiled solid returns over the last few months and may actually be approaching a breakup point.

Howmet Aerospace

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Howmet Aerospace are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Howmet Aerospace displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HubSpot and Howmet Aerospace

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

The idea behind HubSpot and Howmet Aerospace 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.