Correlation Between Troax Group and HMS Networks

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

By analyzing existing cross correlation between Troax Group AB and HMS Networks AB, you can compare the effects of market volatilities on Troax Group and HMS Networks 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 Troax Group with a short position of HMS Networks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Troax Group and HMS Networks.

Diversification Opportunities for Troax Group and HMS Networks

0.0

Correlation Coefficient

Troax Group  HMS Networks

Pay attention - limited upside

The 3 months correlation between Troax and HMS is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Troax Group AB and HMS Networks AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMS Networks AB and Troax Group 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 Troax Group AB are associated (or correlated) with HMS Networks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMS Networks AB has no effect on the direction of Troax Group i.e., Troax Group and HMS Networks go up and down completely randomly.

Pair Corralation between Troax Group and HMS Networks

Assuming the 90 days trading horizon Troax Group AB is expected to under-perform the HMS Networks. But the stock apears to be less risky and, when comparing its historical volatility, Troax Group AB is 1.16 times less risky than HMS Networks. The stock trades about -0.2 of its potential returns per unit of risk. The HMS Networks AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  43,380  in HMS Networks AB on December 29, 2024 and sell it today you would earn a total of  1,780  from holding HMS Networks AB or generate 4.1% return on investment over 90 days.

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

Troax Group AB  vs.  HMS Networks AB

Troax Group AB

Risk-Adjusted Performance

Very Weak

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

HMS Networks AB

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HMS Networks AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HMS Networks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Troax Group and HMS Networks

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

The idea behind Troax Group AB and HMS Networks AB 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.