Correlation Between Origin Materials and Hawkins

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

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

Diversification Opportunities for Origin Materials and Hawkins

-0.22

Correlation Coefficient

Origin Materials  Hawkins

Very good diversification

The 3 months correlation between Origin and Hawkins is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Origin Materials and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins and Origin Materials 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 Origin Materials 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 Origin Materials i.e., Origin Materials and Hawkins go up and down completely randomly.

Pair Corralation between Origin Materials and Hawkins

Given the investment horizon of 90 days Origin Materials is expected to under-perform the Hawkins. In addition to that, Origin Materials is 1.73 times more volatile than Hawkins. It trades about -0.03 of its total potential returns per unit of risk. Hawkins is currently generating about 0.08 per unit of volatility. If you would invest  12,231  in Hawkins on September 4, 2024 and sell it today you would earn a total of  1,434  from holding Hawkins or generate 11.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Origin Materials  vs.  Hawkins

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Hawkins

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Origin Materials and Hawkins

The main advantage of trading using opposite Origin Materials and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Origin Materials 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 Origin Materials 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.