Correlation Between Hrcules SA and Bombril SA

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

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

Diversification Opportunities for Hrcules SA and Bombril SA

0.23

Correlation Coefficient

Hrcules SA  Bombril SA

Modest diversification

The 3 months correlation between Hrcules and Bombril is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hrcules SA and Bombril SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bombril SA and Hrcules SA 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 Hrcules SA are associated (or correlated) with Bombril SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bombril SA has no effect on the direction of Hrcules SA i.e., Hrcules SA and Bombril SA go up and down completely randomly.

Pair Corralation between Hrcules SA and Bombril SA

Assuming the 90 days trading horizon Hrcules SA is expected to generate 1.34 times more return on investment than Bombril SA. However, Hrcules SA is 1.34 times more volatile than Bombril SA. It trades about 0.05 of its potential returns per unit of risk. Bombril SA is currently generating about -0.4 per unit of risk. If you would invest  635.00  in Hrcules SA on September 5, 2024 and sell it today you would earn a total of  14.00  from holding Hrcules SA or generate 2.2% return on investment over 90 days.

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

Hrcules SA   vs.  Bombril SA

Hrcules SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hrcules SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hrcules SA unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bombril SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bombril SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Bombril SA is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hrcules SA and Bombril SA

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

The idea behind Hrcules SA and Bombril 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.