Correlation Between Solution Advanced and HMM

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

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

Diversification Opportunities for Solution Advanced and HMM

0.06

Correlation Coefficient

Solution Advanced  HMM

Significant diversification

The 3 months correlation between Solution and HMM is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Solution Advanced Technology and HMM Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HMM Co and Solution Advanced 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 Solution Advanced Technology 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 Solution Advanced i.e., Solution Advanced and HMM go up and down completely randomly.

Pair Corralation between Solution Advanced and HMM

Assuming the 90 days trading horizon Solution Advanced is expected to generate 2.3 times less return on investment than HMM. In addition to that, Solution Advanced is 1.52 times more volatile than HMM Co. It trades about 0.09 of its total potential returns per unit of risk. HMM Co is currently generating about 0.31 per unit of volatility. If you would invest  1,575,000  in HMM Co on September 12, 2024 and sell it today you would earn a total of  261,000  from holding HMM Co or generate 16.57% return on investment over 90 days.

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

Solution Advanced Technology  vs.  HMM Co

Solution Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solution Advanced Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

HMM Co

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HMM Co are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HMM sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Solution Advanced and HMM

The main advantage of trading using opposite Solution Advanced and HMM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Solution Advanced 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 Solution Advanced Technology 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.

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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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.