Correlation Between Hybrid Financial and HEG

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

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

Diversification Opportunities for Hybrid Financial and HEG

0.31

Correlation Coefficient

Hybrid Financial  HEG

Weak diversification

The 3 months correlation between Hybrid and HEG is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Hybrid Financial Services and HEG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HEG Limited and Hybrid Financial 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 Hybrid Financial Services are associated (or correlated) with HEG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HEG Limited has no effect on the direction of Hybrid Financial i.e., Hybrid Financial and HEG go up and down completely randomly.

Pair Corralation between Hybrid Financial and HEG

Assuming the 90 days trading horizon Hybrid Financial is expected to generate 784.44 times less return on investment than HEG. But when comparing it to its historical volatility, Hybrid Financial Services is 67.29 times less risky than HEG. It trades about 0.02 of its potential returns per unit of risk. HEG Limited is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  17,557  in HEG Limited on October 4, 2024 and sell it today you would earn a total of  33,463  from holding HEG Limited or generate 190.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.06%
Values	Daily Returns

Hybrid Financial Services  vs.  HEG Limited

Hybrid Financial Services

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hybrid Financial Services are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Hybrid Financial reported solid returns over the last few months and may actually be approaching a breakup point.

HEG Limited

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, HEG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hybrid Financial and HEG

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

The idea behind Hybrid Financial Services and HEG Limited 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.