Correlation Between Active Health and HPIL Holding

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

By analyzing existing cross correlation between Active Health Foods and HPIL Holding, you can compare the effects of market volatilities on Active Health and HPIL Holding 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 Active Health with a short position of HPIL Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Active Health and HPIL Holding.

Diversification Opportunities for Active Health and HPIL Holding

0.0

Correlation Coefficient

Active Health  HPIL Holding

Pay attention - limited upside

The 3 months correlation between Active and HPIL is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Active Health Foods and HPIL Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HPIL Holding and Active Health 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 Active Health Foods are associated (or correlated) with HPIL Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HPIL Holding has no effect on the direction of Active Health i.e., Active Health and HPIL Holding go up and down completely randomly.

Pair Corralation between Active Health and HPIL Holding

Given the investment horizon of 90 days Active Health Foods is expected to generate 1.19 times more return on investment than HPIL Holding. However, Active Health is 1.19 times more volatile than HPIL Holding. It trades about 0.06 of its potential returns per unit of risk. HPIL Holding is currently generating about 0.04 per unit of risk. If you would invest  0.03  in Active Health Foods on September 4, 2024 and sell it today you would lose (0.03) from holding Active Health Foods or give up 100.0% of portfolio value over 90 days.

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

Active Health Foods  vs.  HPIL Holding

Active Health Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Active Health Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HPIL Holding

Risk-Adjusted Performance

9 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HPIL Holding are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward indicators, HPIL Holding disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Active Health and HPIL Holding

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

The idea behind Active Health Foods and HPIL Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.