Correlation Between Hexagon AB and Trimble

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

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

Diversification Opportunities for Hexagon AB and Trimble

-0.59

Correlation Coefficient

Hexagon AB  Trimble

Excellent diversification

The 3 months correlation between Hexagon and Trimble is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hexagon AB ADR and Trimble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trimble and Hexagon AB 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 Hexagon AB ADR are associated (or correlated) with Trimble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trimble has no effect on the direction of Hexagon AB i.e., Hexagon AB and Trimble go up and down completely randomly.

Pair Corralation between Hexagon AB and Trimble

Assuming the 90 days horizon Hexagon AB is expected to generate 10.31 times less return on investment than Trimble. But when comparing it to its historical volatility, Hexagon AB ADR is 1.09 times less risky than Trimble. It trades about 0.02 of its potential returns per unit of risk. Trimble is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  5,568  in Trimble on September 12, 2024 and sell it today you would earn a total of  1,828  from holding Trimble or generate 32.83% return on investment over 90 days.

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

Hexagon AB ADR  vs.  Trimble

Hexagon AB ADR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hexagon AB ADR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Hexagon AB is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Trimble

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trimble are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Trimble sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hexagon AB and Trimble

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

The idea behind Hexagon AB ADR and Trimble 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.