Correlation Between D Link and Hitron Technologies

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

By analyzing existing cross correlation between D Link Corp and Hitron Technologies, you can compare the effects of market volatilities on D Link and Hitron Technologies 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 D Link with a short position of Hitron Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of D Link and Hitron Technologies.

Diversification Opportunities for D Link and Hitron Technologies

0.67

Correlation Coefficient

D Link  Hitron Technologies

Poor diversification

The 3 months correlation between 2332 and Hitron is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding D Link Corp and Hitron Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hitron Technologies and D Link 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 D Link Corp are associated (or correlated) with Hitron Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hitron Technologies has no effect on the direction of D Link i.e., D Link and Hitron Technologies go up and down completely randomly.

Pair Corralation between D Link and Hitron Technologies

Assuming the 90 days trading horizon D Link is expected to generate 1.07 times less return on investment than Hitron Technologies. But when comparing it to its historical volatility, D Link Corp is 1.04 times less risky than Hitron Technologies. It trades about 0.16 of its potential returns per unit of risk. Hitron Technologies is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  3,150  in Hitron Technologies on August 31, 2024 and sell it today you would earn a total of  420.00  from holding Hitron Technologies or generate 13.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

D Link Corp  vs.  Hitron Technologies

D Link Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in D Link Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, D Link showed solid returns over the last few months and may actually be approaching a breakup point.

Hitron Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hitron Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hitron Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with D Link and Hitron Technologies

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

The idea behind D Link Corp and Hitron Technologies 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.