Correlation Between BooKook Steel and HMM

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

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

Diversification Opportunities for BooKook Steel and HMM

-0.32

Correlation Coefficient

BooKook Steel  HMM

Very good diversification

The 3 months correlation between BooKook and HMM is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding BooKook Steel Co and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and BooKook Steel 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 BooKook Steel Co are associated (or correlated) with HMM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HMM Co has no effect on the direction of BooKook Steel i.e., BooKook Steel and HMM go up and down completely randomly.

Pair Corralation between BooKook Steel and HMM

Assuming the 90 days trading horizon BooKook Steel Co is expected to under-perform the HMM. But the stock apears to be less risky and, when comparing its historical volatility, BooKook Steel Co is 1.21 times less risky than HMM. The stock trades about -0.01 of its potential returns per unit of risk. The HMM Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,773,000  in HMM Co on September 22, 2024 and sell it today you would earn a total of  67,000  from holding HMM Co or generate 3.78% return on investment over 90 days.

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

BooKook Steel Co  vs.  HMM Co

BooKook Steel

Risk-Adjusted Performance

0 of 100

Very Weak

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

HMM Co

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HMM is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with BooKook Steel and HMM

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

The idea behind BooKook Steel Co and HMM Co 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.