Correlation Between Core and Helium

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

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

Diversification Opportunities for Core and Helium

0.05

Correlation Coefficient

Core  Helium

Significant diversification

The 3 months correlation between Core and Helium is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Core and Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Helium and Core 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 Core are associated (or correlated) with Helium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Helium has no effect on the direction of Core i.e., Core and Helium go up and down completely randomly.

Pair Corralation between Core and Helium

Assuming the 90 days trading horizon Core is expected to generate 1.42 times more return on investment than Helium. However, Core is 1.42 times more volatile than Helium. It trades about 0.19 of its potential returns per unit of risk. Helium is currently generating about 0.03 per unit of risk. If you would invest  87.00  in Core on September 2, 2024 and sell it today you would earn a total of  110.00  from holding Core or generate 126.44% return on investment over 90 days.

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

Core  vs.  Helium

Core

Risk-Adjusted Performance

15 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Core are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Core exhibited solid returns over the last few months and may actually be approaching a breakup point.

Helium

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Helium are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Helium may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Core and Helium

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

The idea behind Core and Helium 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..