Correlation Between HE Equipment and SGS SA

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Can any of the company-specific risk be diversified away by investing in both HE Equipment and SGS SA 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 HE Equipment and SGS SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HE Equipment Services and SGS SA, you can compare the effects of market volatilities on HE Equipment and SGS SA 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 HE Equipment with a short position of SGS SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and SGS SA.

Diversification Opportunities for HE Equipment and SGS SA

HEESSGSDiversified AwayHEESSGSDiversified Away100%
-0.87
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between HEES and SGS is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and SGS SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SGS SA and HE Equipment 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 HE Equipment Services are associated (or correlated) with SGS SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SGS SA has no effect on the direction of HE Equipment i.e., HE Equipment and SGS SA go up and down completely randomly.

Pair Corralation between HE Equipment and SGS SA

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the SGS SA. In addition to that, HE Equipment is 2.98 times more volatile than SGS SA. It trades about -0.21 of its total potential returns per unit of risk. SGS SA is currently generating about 0.17 per unit of volatility. If you would invest  978.00  in SGS SA on September 20, 2024 and sell it today you would earn a total of  28.00  from holding SGS SA or generate 2.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HE Equipment Services  vs.  SGS SA

 Performance 
JavaScript chart by amCharts 3.21.15OctNovDec -100102030
JavaScript chart by amCharts 3.21.15HEES SGSOY
       Timeline  
HE Equipment Services 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, HE Equipment is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec4850525456586062
SGS SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
JavaScript chart by amCharts 3.21.15OctNovDecNovDec9.51010.51111.5

HE Equipment and SGS SA Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-8.43-6.31-4.2-2.080.02.184.356.538.7 0.050.100.150.20
JavaScript chart by amCharts 3.21.15HEES SGSOY
       Returns  

Pair Trading with HE Equipment and SGS SA

The main advantage of trading using opposite HE Equipment and SGS SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, SGS SA 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 SGS SA will offset losses from the drop in SGS SA's long position.
The idea behind HE Equipment Services and SGS SA 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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