Correlation Between Winpak and Hammond Power

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

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

Diversification Opportunities for Winpak and Hammond Power

0.52

Correlation Coefficient

Winpak  Hammond Power

Very weak diversification

The 3 months correlation between Winpak and Hammond is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Winpak and Hammond Power Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammond Power Solutions and Winpak 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 Winpak are associated (or correlated) with Hammond Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammond Power Solutions has no effect on the direction of Winpak i.e., Winpak and Hammond Power go up and down completely randomly.

Pair Corralation between Winpak and Hammond Power

Assuming the 90 days trading horizon Winpak is expected to under-perform the Hammond Power. But the stock apears to be less risky and, when comparing its historical volatility, Winpak is 1.14 times less risky than Hammond Power. The stock trades about -0.17 of its potential returns per unit of risk. The Hammond Power Solutions is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  12,680  in Hammond Power Solutions on October 24, 2024 and sell it today you would lose (734.00) from holding Hammond Power Solutions or give up 5.79% of portfolio value over 90 days.

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

Winpak  vs.  Hammond Power Solutions

Winpak

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Winpak has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Winpak is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Hammond Power Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hammond Power Solutions 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 February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Winpak and Hammond Power

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

The idea behind Winpak and Hammond Power Solutions 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.