Correlation Between Hammond Manufacturing and Geodrill

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

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

Diversification Opportunities for Hammond Manufacturing and Geodrill

0.61

Correlation Coefficient

Hammond Manufacturing  Geodrill

Poor diversification

The 3 months correlation between Hammond and Geodrill is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hammond Manufacturing and Geodrill Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Geodrill Limited and Hammond Manufacturing 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 Hammond Manufacturing are associated (or correlated) with Geodrill. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Geodrill Limited has no effect on the direction of Hammond Manufacturing i.e., Hammond Manufacturing and Geodrill go up and down completely randomly.

Pair Corralation between Hammond Manufacturing and Geodrill

Assuming the 90 days trading horizon Hammond Manufacturing is expected to generate 1.18 times less return on investment than Geodrill. But when comparing it to its historical volatility, Hammond Manufacturing is 1.05 times less risky than Geodrill. It trades about 0.05 of its potential returns per unit of risk. Geodrill Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  261.00  in Geodrill Limited on August 31, 2024 and sell it today you would earn a total of  19.00  from holding Geodrill Limited or generate 7.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Hammond Manufacturing  vs.  Geodrill Limited

Hammond Manufacturing

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hammond Manufacturing are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Hammond Manufacturing may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Geodrill Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Geodrill Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Geodrill may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Hammond Manufacturing and Geodrill

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

The idea behind Hammond Manufacturing and Geodrill Limited 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.