Correlation Between Tandy Leather and HIMARK

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

By analyzing existing cross correlation between Tandy Leather Factory and HIMARK 145 10 MAY 26, you can compare the effects of market volatilities on Tandy Leather and HIMARK 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 Tandy Leather with a short position of HIMARK. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tandy Leather and HIMARK.

Diversification Opportunities for Tandy Leather and HIMARK

-0.39

Correlation Coefficient

Tandy Leather  HIMARK

Very good diversification

The 3 months correlation between Tandy and HIMARK is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Tandy Leather Factory and HIMARK 145 10 MAY 26 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIMARK 145 10 and Tandy Leather 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 Tandy Leather Factory are associated (or correlated) with HIMARK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HIMARK 145 10 has no effect on the direction of Tandy Leather i.e., Tandy Leather and HIMARK go up and down completely randomly.

Pair Corralation between Tandy Leather and HIMARK

Considering the 90-day investment horizon Tandy Leather Factory is expected to under-perform the HIMARK. In addition to that, Tandy Leather is 10.21 times more volatile than HIMARK 145 10 MAY 26. It trades about -0.07 of its total potential returns per unit of risk. HIMARK 145 10 MAY 26 is currently generating about -0.04 per unit of volatility. If you would invest  9,472  in HIMARK 145 10 MAY 26 on December 21, 2024 and sell it today you would lose (26.00) from holding HIMARK 145 10 MAY 26 or give up 0.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	45.0%
Values	Daily Returns

Tandy Leather Factory  vs.  HIMARK 145 10 MAY 26

Tandy Leather Factory

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tandy Leather Factory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's essential indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HIMARK 145 10

Risk-Adjusted Performance

Very Weak

Over the last 90 days HIMARK 145 10 MAY 26 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HIMARK is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tandy Leather and HIMARK

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

The idea behind Tandy Leather Factory and HIMARK 145 10 MAY 26 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.