Correlation Between HVC Investment and Elcom Technology

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

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

Diversification Opportunities for HVC Investment and Elcom Technology

0.67

Correlation Coefficient

HVC Investment  Elcom Technology

Poor diversification

The 3 months correlation between HVC and Elcom is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding HVC Investment and and Elcom Technology Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elcom Technology Com and HVC Investment 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 HVC Investment and are associated (or correlated) with Elcom Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elcom Technology Com has no effect on the direction of HVC Investment i.e., HVC Investment and Elcom Technology go up and down completely randomly.

Pair Corralation between HVC Investment and Elcom Technology

Assuming the 90 days trading horizon HVC Investment and is expected to generate 1.66 times more return on investment than Elcom Technology. However, HVC Investment is 1.66 times more volatile than Elcom Technology Communications. It trades about 0.34 of its potential returns per unit of risk. Elcom Technology Communications is currently generating about 0.16 per unit of risk. If you would invest  822,684  in HVC Investment and on September 29, 2024 and sell it today you would earn a total of  167,316  from holding HVC Investment and or generate 20.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

HVC Investment and  vs.  Elcom Technology Communication

HVC Investment

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HVC Investment and are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical indicators, HVC Investment displayed solid returns over the last few months and may actually be approaching a breakup point.

Elcom Technology Com

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Elcom Technology Communications are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental indicators, Elcom Technology may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with HVC Investment and Elcom Technology

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

The idea behind HVC Investment and and Elcom Technology Communications 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..