Correlation Between Sapiens International and HE Equipment

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

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

Diversification Opportunities for Sapiens International and HE Equipment

-0.27

Correlation Coefficient

Sapiens International  HE Equipment

Very good diversification

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

Pair Corralation between Sapiens International and HE Equipment

Given the investment horizon of 90 days Sapiens International is expected to under-perform the HE Equipment. In addition to that, Sapiens International is 2.18 times more volatile than HE Equipment Services. It trades about -0.2 of its total potential returns per unit of risk. HE Equipment Services is currently generating about -0.21 per unit of volatility. If you would invest  5,807  in HE Equipment Services on October 7, 2024 and sell it today you would lose (922.00) from holding HE Equipment Services or give up 15.88% of portfolio value over 90 days.

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

Sapiens International  vs.  HE Equipment Services

Sapiens International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sapiens International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, HE Equipment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sapiens International and HE Equipment

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

The idea behind Sapiens International and HE Equipment Services 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.