Correlation Between Karnov Group and HMS Networks

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

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

Diversification Opportunities for Karnov Group and HMS Networks

0.44

Correlation Coefficient

Karnov Group  HMS Networks

Very weak diversification

The 3 months correlation between Karnov and HMS is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Karnov Group AB and HMS Networks AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMS Networks AB and Karnov Group 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 Karnov Group AB are associated (or correlated) with HMS Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMS Networks AB has no effect on the direction of Karnov Group i.e., Karnov Group and HMS Networks go up and down completely randomly.

Pair Corralation between Karnov Group and HMS Networks

Assuming the 90 days trading horizon Karnov Group AB is expected to generate 0.92 times more return on investment than HMS Networks. However, Karnov Group AB is 1.09 times less risky than HMS Networks. It trades about 0.05 of its potential returns per unit of risk. HMS Networks AB is currently generating about 0.04 per unit of risk. If you would invest  8,230  in Karnov Group AB on December 29, 2024 and sell it today you would earn a total of  420.00  from holding Karnov Group AB or generate 5.1% return on investment over 90 days.

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

Karnov Group AB  vs.  HMS Networks AB

Karnov Group AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Karnov Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Karnov Group is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

HMS Networks AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HMS Networks AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HMS Networks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Karnov Group and HMS Networks

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

The idea behind Karnov Group AB and HMS Networks AB 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.