Correlation Between LEADCORP and HyVision System

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

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

Diversification Opportunities for LEADCORP and HyVision System

0.72

Correlation Coefficient

LEADCORP  HyVision System

Poor diversification

The 3 months correlation between LEADCORP and HyVision is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding The LEADCORP and HyVision System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HyVision System and LEADCORP 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 The LEADCORP are associated (or correlated) with HyVision System. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HyVision System has no effect on the direction of LEADCORP i.e., LEADCORP and HyVision System go up and down completely randomly.

Pair Corralation between LEADCORP and HyVision System

Assuming the 90 days trading horizon The LEADCORP is expected to generate 0.24 times more return on investment than HyVision System. However, The LEADCORP is 4.2 times less risky than HyVision System. It trades about -0.17 of its potential returns per unit of risk. HyVision System is currently generating about -0.06 per unit of risk. If you would invest  462,000  in The LEADCORP on September 3, 2024 and sell it today you would lose (36,500) from holding The LEADCORP or give up 7.9% of portfolio value over 90 days.

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

The LEADCORP  vs.  HyVision System

LEADCORP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The LEADCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HyVision System

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HyVision System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with LEADCORP and HyVision System

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

The idea behind The LEADCORP and HyVision System 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.