Correlation Between First Asset and Harvest Energy

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

By analyzing existing cross correlation between First Asset Tech and Harvest Energy Leaders, you can compare the effects of market volatilities on First Asset and Harvest Energy 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 First Asset with a short position of Harvest Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Asset and Harvest Energy.

Diversification Opportunities for First Asset and Harvest Energy

-0.04

Correlation Coefficient

First Asset  Harvest Energy

Good diversification

The 3 months correlation between First and Harvest is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Asset Tech and Harvest Energy Leaders in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harvest Energy Leaders and First Asset 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 First Asset Tech are associated (or correlated) with Harvest Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harvest Energy Leaders has no effect on the direction of First Asset i.e., First Asset and Harvest Energy go up and down completely randomly.

Pair Corralation between First Asset and Harvest Energy

Assuming the 90 days trading horizon First Asset Tech is expected to generate 0.99 times more return on investment than Harvest Energy. However, First Asset Tech is 1.01 times less risky than Harvest Energy. It trades about 0.14 of its potential returns per unit of risk. Harvest Energy Leaders is currently generating about 0.02 per unit of risk. If you would invest  2,000  in First Asset Tech on September 5, 2024 and sell it today you would earn a total of  206.00  from holding First Asset Tech or generate 10.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.19%
Values	Daily Returns

First Asset Tech  vs.  Harvest Energy Leaders

First Asset Tech

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Asset Tech are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, First Asset may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Harvest Energy Leaders

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Harvest Energy Leaders are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Harvest Energy is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Asset and Harvest Energy

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

The idea behind First Asset Tech and Harvest Energy Leaders 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.