Correlation Between Garmin and Hexagon AB

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

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

Diversification Opportunities for Garmin and Hexagon AB

-0.69

Correlation Coefficient

Garmin  Hexagon AB

Excellent diversification

The 3 months correlation between Garmin and Hexagon is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Garmin and Hexagon AB ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hexagon AB ADR and Garmin 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 Garmin 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 ADR has no effect on the direction of Garmin i.e., Garmin and Hexagon AB go up and down completely randomly.

Pair Corralation between Garmin and Hexagon AB

Given the investment horizon of 90 days Garmin is expected to generate 1.2 times more return on investment than Hexagon AB. However, Garmin is 1.2 times more volatile than Hexagon AB ADR. It trades about 0.12 of its potential returns per unit of risk. Hexagon AB ADR is currently generating about -0.03 per unit of risk. If you would invest  12,473  in Garmin on September 12, 2024 and sell it today you would earn a total of  9,613  from holding Garmin or generate 77.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	99.6%
Values	Daily Returns

Garmin  vs.  Hexagon AB ADR

Garmin

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Garmin are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain primary indicators, Garmin displayed solid returns over the last few months and may actually be approaching a breakup point.

Hexagon AB ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Hexagon AB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Garmin and Hexagon AB

The main advantage of trading using opposite Garmin and Hexagon AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Garmin 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 Garmin and Hexagon AB ADR 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.