Correlation Between Silkbank and Hub Power

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

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

Diversification Opportunities for Silkbank and Hub Power

0.57

Correlation Coefficient

Silkbank  Hub Power

Very weak diversification

The 3 months correlation between Silkbank and Hub is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Silkbank and Hub Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hub Power and Silkbank 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 Silkbank are associated (or correlated) with Hub Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hub Power has no effect on the direction of Silkbank i.e., Silkbank and Hub Power go up and down completely randomly.

Pair Corralation between Silkbank and Hub Power

Assuming the 90 days trading horizon Silkbank is expected to generate 2.0 times more return on investment than Hub Power. However, Silkbank is 2.0 times more volatile than Hub Power. It trades about 0.07 of its potential returns per unit of risk. Hub Power is currently generating about 0.09 per unit of risk. If you would invest  104.00  in Silkbank on December 23, 2024 and sell it today you would earn a total of  11.00  from holding Silkbank or generate 10.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Silkbank  vs.  Hub Power

Silkbank

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Silkbank are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Silkbank sustained solid returns over the last few months and may actually be approaching a breakup point.

Hub Power

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hub Power are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hub Power may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Silkbank and Hub Power

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

The idea behind Silkbank and Hub Power 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.