Correlation Between Hill Street and Eq Energy

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

By analyzing existing cross correlation between Hill Street Beverage and Eq Energy Drink, you can compare the effects of market volatilities on Hill Street and Eq Energy 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 Hill Street with a short position of Eq Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hill Street and Eq Energy.

Diversification Opportunities for Hill Street and Eq Energy

0.27

Correlation Coefficient

Hill Street  Eq Energy

Modest diversification

The 3 months correlation between Hill and EQLB is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Hill Street Beverage and Eq Energy Drink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eq Energy Drink and Hill Street 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 Hill Street Beverage are associated (or correlated) with Eq Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eq Energy Drink has no effect on the direction of Hill Street i.e., Hill Street and Eq Energy go up and down completely randomly.

Pair Corralation between Hill Street and Eq Energy

Assuming the 90 days horizon Hill Street Beverage is expected to under-perform the Eq Energy. But the pink sheet apears to be less risky and, when comparing its historical volatility, Hill Street Beverage is 2.4 times less risky than Eq Energy. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Eq Energy Drink is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  0.12  in Eq Energy Drink on August 30, 2024 and sell it today you would lose (0.04) from holding Eq Energy Drink or give up 33.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Hill Street Beverage  vs.  Eq Energy Drink

Hill Street Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hill Street Beverage has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Eq Energy Drink

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eq Energy Drink are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Eq Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hill Street and Eq Energy

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

The idea behind Hill Street Beverage and Eq Energy Drink 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.