Correlation Between HEG and Fine Organic

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

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

Diversification Opportunities for HEG and Fine Organic

0.3

Correlation Coefficient

HEG  Fine Organic

Weak diversification

The 3 months correlation between HEG and Fine is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding HEG Limited and Fine Organic Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fine Organic Industries and HEG 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 HEG Limited are associated (or correlated) with Fine Organic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fine Organic Industries has no effect on the direction of HEG i.e., HEG and Fine Organic go up and down completely randomly.

Pair Corralation between HEG and Fine Organic

Assuming the 90 days trading horizon HEG Limited is expected to generate 1.85 times more return on investment than Fine Organic. However, HEG is 1.85 times more volatile than Fine Organic Industries. It trades about 0.11 of its potential returns per unit of risk. Fine Organic Industries is currently generating about -0.05 per unit of risk. If you would invest  44,975  in HEG Limited on September 19, 2024 and sell it today you would earn a total of  11,365  from holding HEG Limited or generate 25.27% return on investment over 90 days.

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

HEG Limited  vs.  Fine Organic Industries

HEG Limited

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HEG Limited are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, HEG exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fine Organic Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fine Organic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HEG and Fine Organic

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

The idea behind HEG Limited and Fine Organic Industries 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..