Correlation Between Stratasys and HE Equipment

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

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

Diversification Opportunities for Stratasys and HE Equipment

0.11

Correlation Coefficient

Stratasys  HE Equipment

Average diversification

The 3 months correlation between Stratasys and HEES is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Stratasys 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 Stratasys 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 Stratasys 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 Stratasys i.e., Stratasys and HE Equipment go up and down completely randomly.

Pair Corralation between Stratasys and HE Equipment

Given the investment horizon of 90 days Stratasys is expected to under-perform the HE Equipment. But the stock apears to be less risky and, when comparing its historical volatility, Stratasys is 10.19 times less risky than HE Equipment. The stock trades about -0.06 of its potential returns per unit of risk. The HE Equipment Services is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,920  in HE Equipment Services on October 23, 2024 and sell it today you would earn a total of  3,892  from holding HE Equipment Services or generate 79.11% return on investment over 90 days.

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

Stratasys  vs.  HE Equipment Services

Stratasys

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Stratasys are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Stratasys unveiled solid returns over the last few months and may actually be approaching a breakup point.

HE Equipment Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, HE Equipment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stratasys and HE Equipment

The main advantage of trading using opposite Stratasys and HE Equipment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stratasys 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 Stratasys 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.