Correlation Between TDG Global and HUD1 Investment

Can any of the company-specific risk be diversified away by investing in both TDG Global and HUD1 Investment 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 TDG Global and HUD1 Investment into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TDG Global Investment and HUD1 Investment and, you can compare the effects of market volatilities on TDG Global and HUD1 Investment 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 TDG Global with a short position of HUD1 Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of TDG Global and HUD1 Investment.

Diversification Opportunities for TDG Global and HUD1 Investment

0.41

Correlation Coefficient

TDG Global  HUD1 Investment

Very weak diversification

The 3 months correlation between TDG and HUD1 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding TDG Global Investment and HUD1 Investment and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HUD1 Investment and TDG Global 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 TDG Global Investment are associated (or correlated) with HUD1 Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HUD1 Investment has no effect on the direction of TDG Global i.e., TDG Global and HUD1 Investment go up and down completely randomly.

Pair Corralation between TDG Global and HUD1 Investment

Assuming the 90 days trading horizon TDG Global Investment is expected to under-perform the HUD1 Investment. But the stock apears to be less risky and, when comparing its historical volatility, TDG Global Investment is 3.89 times less risky than HUD1 Investment. The stock trades about -0.04 of its potential returns per unit of risk. The HUD1 Investment and is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  581,000  in HUD1 Investment and on October 20, 2024 and sell it today you would earn a total of  9,000  from holding HUD1 Investment and or generate 1.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	63.64%
Values	Daily Returns

TDG Global Investment  vs.  HUD1 Investment and

TDG Global Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TDG Global Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

HUD1 Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HUD1 Investment and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, HUD1 Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with TDG Global and HUD1 Investment

The main advantage of trading using opposite TDG Global and HUD1 Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TDG Global position performs unexpectedly, HUD1 Investment 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 HUD1 Investment will offset losses from the drop in HUD1 Investment's long position.

The idea behind TDG Global Investment and HUD1 Investment and 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.