Correlation Between Flare and Hivemapper

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

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

Diversification Opportunities for Flare and Hivemapper

0.32

Correlation Coefficient

Flare  Hivemapper

Weak diversification

The 3 months correlation between Flare and Hivemapper is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Flare and Hivemapper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hivemapper and Flare 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 Flare are associated (or correlated) with Hivemapper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hivemapper has no effect on the direction of Flare i.e., Flare and Hivemapper go up and down completely randomly.

Pair Corralation between Flare and Hivemapper

Assuming the 90 days trading horizon Flare is expected to generate 1.05 times more return on investment than Hivemapper. However, Flare is 1.05 times more volatile than Hivemapper. It trades about 0.12 of its potential returns per unit of risk. Hivemapper is currently generating about 0.0 per unit of risk. If you would invest  1.60  in Flare on August 30, 2024 and sell it today you would earn a total of  0.72  from holding Flare or generate 45.0% return on investment over 90 days.

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

Flare  vs.  Hivemapper

Flare

Risk-Adjusted Performance

9 of 100

OK

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

Hivemapper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hivemapper has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Hivemapper is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Flare and Hivemapper

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

The idea behind Flare and Hivemapper 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.