Correlation Between Hawkins and REX American

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

By analyzing existing cross correlation between Hawkins and REX American Resources, you can compare the effects of market volatilities on Hawkins and REX American 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 REX American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hawkins and REX American.

Diversification Opportunities for Hawkins and REX American

-0.3

Correlation Coefficient

Hawkins  REX American

Very good diversification

The 3 months correlation between Hawkins and REX is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Hawkins and REX American Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REX American Resources 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 REX American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REX American Resources has no effect on the direction of Hawkins i.e., Hawkins and REX American go up and down completely randomly.

Pair Corralation between Hawkins and REX American

Given the investment horizon of 90 days Hawkins is expected to generate 1.38 times more return on investment than REX American. However, Hawkins is 1.38 times more volatile than REX American Resources. It trades about 0.03 of its potential returns per unit of risk. REX American Resources is currently generating about -0.11 per unit of risk. If you would invest  12,978  in Hawkins on September 13, 2024 and sell it today you would earn a total of  279.00  from holding Hawkins or generate 2.15% return on investment over 90 days.

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

Hawkins  vs.  REX American Resources

Hawkins

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating forward-looking signals, Hawkins may actually be approaching a critical reversion point that can send shares even higher in January 2025.

REX American Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REX American Resources has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, REX American is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hawkins and REX American

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

The idea behind Hawkins and REX American Resources 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.