Correlation Between Invest Capital and Hi Tech

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

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

Diversification Opportunities for Invest Capital and Hi Tech

0.71

Correlation Coefficient

Invest Capital  Hi Tech

Poor diversification

The 3 months correlation between Invest and HTL is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Invest Capital Investment and Hi Tech Lubricants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hi Tech Lubricants and Invest Capital 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 Invest Capital Investment are associated (or correlated) with Hi Tech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hi Tech Lubricants has no effect on the direction of Invest Capital i.e., Invest Capital and Hi Tech go up and down completely randomly.

Pair Corralation between Invest Capital and Hi Tech

Assuming the 90 days trading horizon Invest Capital Investment is expected to generate 1.47 times more return on investment than Hi Tech. However, Invest Capital is 1.47 times more volatile than Hi Tech Lubricants. It trades about -0.1 of its potential returns per unit of risk. Hi Tech Lubricants is currently generating about -0.24 per unit of risk. If you would invest  183.00  in Invest Capital Investment on October 8, 2024 and sell it today you would lose (22.00) from holding Invest Capital Investment or give up 12.02% of portfolio value over 90 days.

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

Invest Capital Investment  vs.  Hi Tech Lubricants

Invest Capital Investment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Invest Capital Investment are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Invest Capital disclosed solid returns over the last few months and may actually be approaching a breakup point.

Hi Tech Lubricants

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hi Tech Lubricants are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, Hi Tech reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Invest Capital and Hi Tech

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

The idea behind Invest Capital Investment and Hi Tech Lubricants 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.