Correlation Between Hawkins and Albemarle

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

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

Diversification Opportunities for Hawkins and Albemarle

0.5

Correlation Coefficient

Hawkins  Albemarle

Very weak diversification

The 3 months correlation between Hawkins and Albemarle is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and Albemarle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albemarle and Hawkins 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 Hawkins are associated (or correlated) with Albemarle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albemarle has no effect on the direction of Hawkins i.e., Hawkins and Albemarle go up and down completely randomly.

Pair Corralation between Hawkins and Albemarle

Given the investment horizon of 90 days Hawkins is expected to generate 1.6 times more return on investment than Albemarle. However, Hawkins is 1.6 times more volatile than Albemarle. It trades about -0.2 of its potential returns per unit of risk. Albemarle is currently generating about -0.36 per unit of risk. If you would invest  13,252  in Hawkins on October 11, 2024 and sell it today you would lose (1,442) from holding Hawkins or give up 10.88% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Hawkins  vs.  Albemarle

Hawkins

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hawkins has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Albemarle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Albemarle has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Hawkins and Albemarle

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

The idea behind Hawkins and Albemarle 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.