Correlation Between Timken and Hillman Solutions

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

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

Diversification Opportunities for Timken and Hillman Solutions

0.47

Correlation Coefficient

Timken  Hillman Solutions

Very weak diversification

The 3 months correlation between Timken and Hillman is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Hillman Solutions Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hillman Solutions Corp and Timken 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 Timken Company are associated (or correlated) with Hillman Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hillman Solutions Corp has no effect on the direction of Timken i.e., Timken and Hillman Solutions go up and down completely randomly.

Pair Corralation between Timken and Hillman Solutions

Considering the 90-day investment horizon Timken Company is expected to generate 0.98 times more return on investment than Hillman Solutions. However, Timken Company is 1.02 times less risky than Hillman Solutions. It trades about 0.05 of its potential returns per unit of risk. Hillman Solutions Corp is currently generating about -0.09 per unit of risk. If you would invest  7,058  in Timken Company on December 29, 2024 and sell it today you would earn a total of  321.00  from holding Timken Company or generate 4.55% return on investment over 90 days.

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

Timken Company  vs.  Hillman Solutions Corp

Timken Company

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Hillman Solutions Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hillman Solutions Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Timken and Hillman Solutions

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

The idea behind Timken Company and Hillman Solutions Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.