Correlation Between Hawkins and Cabot

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

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

Diversification Opportunities for Hawkins and Cabot

0.43

Correlation Coefficient

Hawkins  Cabot

Very weak diversification

The 3 months correlation between Hawkins and Cabot is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and Cabot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabot and Hawkins 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 Hawkins are associated (or correlated) with Cabot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabot has no effect on the direction of Hawkins i.e., Hawkins and Cabot go up and down completely randomly.

Pair Corralation between Hawkins and Cabot

Given the investment horizon of 90 days Hawkins is expected to generate 1.47 times more return on investment than Cabot. However, Hawkins is 1.47 times more volatile than Cabot. It trades about 0.05 of its potential returns per unit of risk. Cabot is currently generating about 0.05 per unit of risk. If you would invest  12,649  in Hawkins on August 30, 2024 and sell it today you would earn a total of  690.00  from holding Hawkins or generate 5.45% return on investment over 90 days.

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

Hawkins  vs.  Cabot

Hawkins

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Cabot

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cabot are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Cabot is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hawkins and Cabot

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

The idea behind Hawkins and Cabot 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.