Correlation Between HCM Defender and AdvisorShares

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

By analyzing existing cross correlation between HCM Defender 100 and AdvisorShares Q Dynamic, you can compare the effects of market volatilities on HCM Defender and AdvisorShares 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 HCM Defender with a short position of AdvisorShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCM Defender and AdvisorShares.

Diversification Opportunities for HCM Defender and AdvisorShares

0.86

Correlation Coefficient

HCM Defender  AdvisorShares

Very poor diversification

The 3 months correlation between HCM and AdvisorShares is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding HCM Defender 100 and AdvisorShares Q Dynamic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AdvisorShares Q Dynamic and HCM Defender 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 HCM Defender 100 are associated (or correlated) with AdvisorShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AdvisorShares Q Dynamic has no effect on the direction of HCM Defender i.e., HCM Defender and AdvisorShares go up and down completely randomly.

Pair Corralation between HCM Defender and AdvisorShares

Considering the 90-day investment horizon HCM Defender 100 is expected to under-perform the AdvisorShares. In addition to that, HCM Defender is 1.55 times more volatile than AdvisorShares Q Dynamic. It trades about -0.16 of its total potential returns per unit of risk. AdvisorShares Q Dynamic is currently generating about -0.06 per unit of volatility. If you would invest  3,613  in AdvisorShares Q Dynamic on December 29, 2024 and sell it today you would lose (130.00) from holding AdvisorShares Q Dynamic or give up 3.6% of portfolio value over 90 days.

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

HCM Defender 100  vs.  AdvisorShares Q Dynamic

HCM Defender 100

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCM Defender 100 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Etf's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the Etf traders.

AdvisorShares Q Dynamic

Risk-Adjusted Performance

Very Weak

Over the last 90 days AdvisorShares Q Dynamic has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AdvisorShares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HCM Defender and AdvisorShares

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

The idea behind HCM Defender 100 and AdvisorShares Q Dynamic 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.