Correlation Between Hydract AS and Impero AS

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

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

Diversification Opportunities for Hydract AS and Impero AS

0.07

Correlation Coefficient

Hydract AS  Impero AS

Significant diversification

The 3 months correlation between Hydract and Impero is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hydract AS and Impero AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Impero AS and Hydract AS 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 Hydract AS are associated (or correlated) with Impero AS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Impero AS has no effect on the direction of Hydract AS i.e., Hydract AS and Impero AS go up and down completely randomly.

Pair Corralation between Hydract AS and Impero AS

Assuming the 90 days trading horizon Hydract AS is expected to generate 2.85 times more return on investment than Impero AS. However, Hydract AS is 2.85 times more volatile than Impero AS. It trades about 0.03 of its potential returns per unit of risk. Impero AS is currently generating about 0.06 per unit of risk. If you would invest  138.00  in Hydract AS on September 1, 2024 and sell it today you would lose (92.00) from holding Hydract AS or give up 66.67% of portfolio value over 90 days.

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

Hydract AS  vs.  Impero AS

Hydract AS

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hydract AS are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Hydract AS sustained solid returns over the last few months and may actually be approaching a breakup point.

Impero AS

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Impero AS are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Impero AS sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hydract AS and Impero AS

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

The idea behind Hydract AS and Impero AS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.