Correlation Between NET Power and Hawkins

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

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

Diversification Opportunities for NET Power and Hawkins

0.27

Correlation Coefficient

NET Power  Hawkins

Modest diversification

The 3 months correlation between NET and Hawkins is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding NET Power and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins and NET Power 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 NET Power are associated (or correlated) with Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of NET Power i.e., NET Power and Hawkins go up and down completely randomly.

Pair Corralation between NET Power and Hawkins

Given the investment horizon of 90 days NET Power is expected to under-perform the Hawkins. In addition to that, NET Power is 1.61 times more volatile than Hawkins. It trades about -0.32 of its total potential returns per unit of risk. Hawkins is currently generating about -0.16 per unit of volatility. If you would invest  13,547  in Hawkins on September 25, 2024 and sell it today you would lose (1,149) from holding Hawkins or give up 8.48% of portfolio value over 90 days.

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

NET Power  vs.  Hawkins

NET Power

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NET Power are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NET Power reported solid returns over the last few months and may actually be approaching a breakup point.

Hawkins

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward-looking signals, Hawkins is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NET Power and Hawkins

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

The idea behind NET Power and Hawkins 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.