Correlation Between Highcon Systems and Carmit

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

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

Diversification Opportunities for Highcon Systems and Carmit

-0.54

Correlation Coefficient

Highcon Systems  Carmit

Excellent diversification

The 3 months correlation between Highcon and Carmit is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Highcon Systems and Carmit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carmit and Highcon Systems 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 Highcon Systems are associated (or correlated) with Carmit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carmit has no effect on the direction of Highcon Systems i.e., Highcon Systems and Carmit go up and down completely randomly.

Pair Corralation between Highcon Systems and Carmit

Assuming the 90 days trading horizon Highcon Systems is expected to under-perform the Carmit. In addition to that, Highcon Systems is 1.42 times more volatile than Carmit. It trades about -0.06 of its total potential returns per unit of risk. Carmit is currently generating about 0.0 per unit of volatility. If you would invest  119,300  in Carmit on September 28, 2024 and sell it today you would lose (1,400) from holding Carmit or give up 1.17% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Highcon Systems  vs.  Carmit

Highcon Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Highcon Systems has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Highcon Systems is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Carmit

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carmit are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Carmit is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Highcon Systems and Carmit

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

The idea behind Highcon Systems and Carmit 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.