Correlation Between Hawkins and Marchex

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

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

Diversification Opportunities for Hawkins and Marchex

0.25

Correlation Coefficient

Hawkins  Marchex

Modest diversification

The 3 months correlation between Hawkins and Marchex is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and Marchex in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marchex 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 Marchex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marchex has no effect on the direction of Hawkins i.e., Hawkins and Marchex go up and down completely randomly.

Pair Corralation between Hawkins and Marchex

Given the investment horizon of 90 days Hawkins is expected to generate 0.79 times more return on investment than Marchex. However, Hawkins is 1.27 times less risky than Marchex. It trades about 0.13 of its potential returns per unit of risk. Marchex is currently generating about 0.08 per unit of risk. If you would invest  8,794  in Hawkins on August 30, 2024 and sell it today you would earn a total of  4,545  from holding Hawkins or generate 51.68% return on investment over 90 days.

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

Hawkins  vs.  Marchex

Hawkins

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Hawkins may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Marchex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marchex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, Marchex is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hawkins and Marchex

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

The idea behind Hawkins and Marchex 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 Transaction History module to view history of all your transactions and understand their impact on performance.