Correlation Between H M and FastPartner

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

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

Diversification Opportunities for H M and FastPartner

0.69

Correlation Coefficient

H M  FastPartner

Poor diversification

The 3 months correlation between HM-B and FastPartner is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding H M Hennes and FastPartner AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FastPartner AB and H M 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 H M Hennes are associated (or correlated) with FastPartner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FastPartner AB has no effect on the direction of H M i.e., H M and FastPartner go up and down completely randomly.

Pair Corralation between H M and FastPartner

Assuming the 90 days trading horizon H M Hennes is expected to generate 0.81 times more return on investment than FastPartner. However, H M Hennes is 1.24 times less risky than FastPartner. It trades about 0.06 of its potential returns per unit of risk. FastPartner AB is currently generating about -0.02 per unit of risk. If you would invest  15,466  in H M Hennes on September 6, 2024 and sell it today you would earn a total of  869.00  from holding H M Hennes or generate 5.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

H M Hennes  vs.  FastPartner AB

H M Hennes

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in H M Hennes are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, H M is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

FastPartner AB

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with H M and FastPartner

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

The idea behind H M Hennes and FastPartner AB 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.