Correlation Between Cepton and Hexagon AB

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

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

Diversification Opportunities for Cepton and Hexagon AB

0.05

Correlation Coefficient

Cepton  Hexagon AB

Significant diversification

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

Pair Corralation between Cepton and Hexagon AB

Given the investment horizon of 90 days Cepton Inc is expected to generate 0.75 times more return on investment than Hexagon AB. However, Cepton Inc is 1.33 times less risky than Hexagon AB. It trades about 0.09 of its potential returns per unit of risk. Hexagon AB is currently generating about -0.02 per unit of risk. If you would invest  266.00  in Cepton Inc on September 29, 2024 and sell it today you would earn a total of  58.00  from holding Cepton Inc or generate 21.8% return on investment over 90 days.

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

Cepton Inc  vs.  Hexagon AB

Cepton Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cepton Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cepton is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Hexagon AB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hexagon AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Hexagon AB is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cepton and Hexagon AB

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

The idea behind Cepton Inc and Hexagon AB 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.