Correlation Between Deluxe and Hurco Companies

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

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

Diversification Opportunities for Deluxe and Hurco Companies

0.27

Correlation Coefficient

Deluxe  Hurco Companies

Modest diversification

The 3 months correlation between Deluxe and Hurco is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Deluxe and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies and Deluxe 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 Deluxe are associated (or correlated) with Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Deluxe i.e., Deluxe and Hurco Companies go up and down completely randomly.

Pair Corralation between Deluxe and Hurco Companies

Considering the 90-day investment horizon Deluxe is expected to generate 0.99 times more return on investment than Hurco Companies. However, Deluxe is 1.01 times less risky than Hurco Companies. It trades about 0.04 of its potential returns per unit of risk. Hurco Companies is currently generating about -0.01 per unit of risk. If you would invest  1,657  in Deluxe on September 28, 2024 and sell it today you would earn a total of  642.00  from holding Deluxe or generate 38.74% return on investment over 90 days.

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

Deluxe  vs.  Hurco Companies

Deluxe

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Deluxe are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating essential indicators, Deluxe showed solid returns over the last few months and may actually be approaching a breakup point.

Hurco Companies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hurco Companies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Deluxe and Hurco Companies

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

The idea behind Deluxe and Hurco Companies 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.