Correlation Between Hiru and NaturalShrimp

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

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

Diversification Opportunities for Hiru and NaturalShrimp

-0.17

Correlation Coefficient

Hiru  NaturalShrimp

Good diversification

The 3 months correlation between Hiru and NaturalShrimp is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Hiru Corp. and NaturalShrimp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NaturalShrimp and Hiru 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 Hiru Corporation are associated (or correlated) with NaturalShrimp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NaturalShrimp has no effect on the direction of Hiru i.e., Hiru and NaturalShrimp go up and down completely randomly.

Pair Corralation between Hiru and NaturalShrimp

Given the investment horizon of 90 days Hiru Corporation is expected to under-perform the NaturalShrimp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hiru Corporation is 1.28 times less risky than NaturalShrimp. The pink sheet trades about -0.07 of its potential returns per unit of risk. The NaturalShrimp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  0.38  in NaturalShrimp on September 12, 2024 and sell it today you would lose (0.01) from holding NaturalShrimp or give up 2.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Hiru Corp.  vs.  NaturalShrimp

Hiru

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hiru Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

NaturalShrimp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NaturalShrimp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady primary indicators, NaturalShrimp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hiru and NaturalShrimp

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

The idea behind Hiru Corporation and NaturalShrimp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.