Correlation Between Heavitree Brewery and Investment

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

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

Diversification Opportunities for Heavitree Brewery and Investment

-0.4

Correlation Coefficient

Heavitree Brewery  Investment

Very good diversification

The 3 months correlation between Heavitree and Investment is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Heavitree Brewery and The Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investment and Heavitree Brewery 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 Heavitree Brewery are associated (or correlated) with Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investment has no effect on the direction of Heavitree Brewery i.e., Heavitree Brewery and Investment go up and down completely randomly.

Pair Corralation between Heavitree Brewery and Investment

Assuming the 90 days trading horizon Heavitree Brewery is expected to under-perform the Investment. In addition to that, Heavitree Brewery is 1.19 times more volatile than The Investment. It trades about -0.16 of its total potential returns per unit of risk. The Investment is currently generating about -0.04 per unit of volatility. If you would invest  37,500  in The Investment on October 9, 2024 and sell it today you would lose (300.00) from holding The Investment or give up 0.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.5%
Values	Daily Returns

Heavitree Brewery  vs.  The Investment

Heavitree Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heavitree Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Heavitree Brewery is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Investment is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Heavitree Brewery and Investment

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

The idea behind Heavitree Brewery and The Investment 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.