Correlation Between HM Inwest and Play2Chill

Can any of the company-specific risk be diversified away by investing in both HM Inwest and Play2Chill 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 HM Inwest and Play2Chill into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HM Inwest SA and Play2Chill SA, you can compare the effects of market volatilities on HM Inwest and Play2Chill 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 HM Inwest with a short position of Play2Chill. Check out your portfolio center. Please also check ongoing floating volatility patterns of HM Inwest and Play2Chill.

Diversification Opportunities for HM Inwest and Play2Chill

0.15

Correlation Coefficient

HM Inwest  Play2Chill

Average diversification

The 3 months correlation between HMI and Play2Chill is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding HM Inwest SA and Play2Chill SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Play2Chill SA and HM Inwest 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 HM Inwest SA are associated (or correlated) with Play2Chill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Play2Chill SA has no effect on the direction of HM Inwest i.e., HM Inwest and Play2Chill go up and down completely randomly.

Pair Corralation between HM Inwest and Play2Chill

Assuming the 90 days trading horizon HM Inwest SA is expected to generate 1.07 times more return on investment than Play2Chill. However, HM Inwest is 1.07 times more volatile than Play2Chill SA. It trades about 0.08 of its potential returns per unit of risk. Play2Chill SA is currently generating about 0.03 per unit of risk. If you would invest  4,020  in HM Inwest SA on September 18, 2024 and sell it today you would earn a total of  590.00  from holding HM Inwest SA or generate 14.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	87.1%
Values	Daily Returns

HM Inwest SA  vs.  Play2Chill SA

HM Inwest SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HM Inwest SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HM Inwest reported solid returns over the last few months and may actually be approaching a breakup point.

Play2Chill SA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Play2Chill SA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Play2Chill is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HM Inwest and Play2Chill

The main advantage of trading using opposite HM Inwest and Play2Chill positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HM Inwest position performs unexpectedly, Play2Chill 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 Play2Chill will offset losses from the drop in Play2Chill's long position.

The idea behind HM Inwest SA and Play2Chill 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.