Correlation Between Datatec and Hammerson PLC

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

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

Diversification Opportunities for Datatec and Hammerson PLC

0.54

Correlation Coefficient

Datatec  Hammerson PLC

Very weak diversification

The 3 months correlation between Datatec and Hammerson is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Datatec and Hammerson PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammerson PLC and Datatec 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 Datatec are associated (or correlated) with Hammerson PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammerson PLC has no effect on the direction of Datatec i.e., Datatec and Hammerson PLC go up and down completely randomly.

Pair Corralation between Datatec and Hammerson PLC

Assuming the 90 days trading horizon Datatec is expected to generate 19.51 times less return on investment than Hammerson PLC. But when comparing it to its historical volatility, Datatec is 21.29 times less risky than Hammerson PLC. It trades about 0.05 of its potential returns per unit of risk. Hammerson PLC is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  51,300  in Hammerson PLC on September 3, 2024 and sell it today you would earn a total of  620,700  from holding Hammerson PLC or generate 1209.94% return on investment over 90 days.

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

Datatec  vs.  Hammerson PLC

Datatec

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Datatec are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Datatec exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hammerson PLC

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hammerson PLC are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Hammerson PLC exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datatec and Hammerson PLC

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

The idea behind Datatec and Hammerson PLC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.