Correlation Between Mekonomen and Hitech Development

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

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

Diversification Opportunities for Mekonomen and Hitech Development

0.29

Correlation Coefficient

Mekonomen  Hitech Development

Modest diversification

The 3 months correlation between Mekonomen and Hitech is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mekonomen AB and Hitech Development Wireless in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitech Development and Mekonomen 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 Mekonomen AB are associated (or correlated) with Hitech Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitech Development has no effect on the direction of Mekonomen i.e., Mekonomen and Hitech Development go up and down completely randomly.

Pair Corralation between Mekonomen and Hitech Development

Assuming the 90 days trading horizon Mekonomen AB is expected to generate 0.2 times more return on investment than Hitech Development. However, Mekonomen AB is 5.09 times less risky than Hitech Development. It trades about -0.07 of its potential returns per unit of risk. Hitech Development Wireless is currently generating about -0.28 per unit of risk. If you would invest  13,860  in Mekonomen AB on October 5, 2024 and sell it today you would lose (320.00) from holding Mekonomen AB or give up 2.31% of portfolio value over 90 days.

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

Mekonomen AB  vs.  Hitech Development Wireless

Mekonomen AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mekonomen AB has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mekonomen is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Hitech Development

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Hitech Development Wireless has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Hitech Development unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mekonomen and Hitech Development

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

The idea behind Mekonomen AB and Hitech Development Wireless 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.