Correlation Between REC Silicon and Hexagon Composites

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

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

Diversification Opportunities for REC Silicon and Hexagon Composites

-0.51

Correlation Coefficient

REC Silicon  Hexagon Composites

Excellent diversification

The 3 months correlation between REC and Hexagon is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding REC Silicon ASA and Hexagon Composites ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon Composites ASA and REC Silicon 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 REC Silicon ASA are associated (or correlated) with Hexagon Composites. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hexagon Composites ASA has no effect on the direction of REC Silicon i.e., REC Silicon and Hexagon Composites go up and down completely randomly.

Pair Corralation between REC Silicon and Hexagon Composites

Assuming the 90 days trading horizon REC Silicon ASA is expected to under-perform the Hexagon Composites. In addition to that, REC Silicon is 2.65 times more volatile than Hexagon Composites ASA. It trades about -0.05 of its total potential returns per unit of risk. Hexagon Composites ASA is currently generating about 0.04 per unit of volatility. If you would invest  4,020  in Hexagon Composites ASA on August 31, 2024 and sell it today you would earn a total of  205.00  from holding Hexagon Composites ASA or generate 5.1% return on investment over 90 days.

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

REC Silicon ASA  vs.  Hexagon Composites ASA

REC Silicon ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC Silicon ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Hexagon Composites ASA

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon Composites ASA are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Hexagon Composites may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with REC Silicon and Hexagon Composites

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

The idea behind REC Silicon ASA and Hexagon Composites ASA 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.