Correlation Between Hexcel and ENTERGY Dusseldorf

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

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

Diversification Opportunities for Hexcel and ENTERGY Dusseldorf

0.7

Correlation Coefficient

Hexcel  ENTERGY Dusseldorf

Poor diversification

The 3 months correlation between Hexcel and ENTERGY is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Hexcel and ENTERGY Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTERGY Dusseldorf and Hexcel 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 Hexcel are associated (or correlated) with ENTERGY Dusseldorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTERGY Dusseldorf has no effect on the direction of Hexcel i.e., Hexcel and ENTERGY Dusseldorf go up and down completely randomly.

Pair Corralation between Hexcel and ENTERGY Dusseldorf

Assuming the 90 days horizon Hexcel is expected to generate 2.59 times less return on investment than ENTERGY Dusseldorf. But when comparing it to its historical volatility, Hexcel is 1.45 times less risky than ENTERGY Dusseldorf. It trades about 0.09 of its potential returns per unit of risk. ENTERGY Dusseldorf is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  5,700  in ENTERGY Dusseldorf on September 29, 2024 and sell it today you would earn a total of  1,500  from holding ENTERGY Dusseldorf or generate 26.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.41%
Values	Daily Returns

Hexcel  vs.  ENTERGY Dusseldorf

Hexcel

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hexcel are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hexcel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

ENTERGY Dusseldorf

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ENTERGY Dusseldorf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ENTERGY Dusseldorf unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hexcel and ENTERGY Dusseldorf

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

The idea behind Hexcel and ENTERGY Dusseldorf 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.