Correlation Between RIAS AS and HH International

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

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

Diversification Opportunities for RIAS AS and HH International

0.67

Correlation Coefficient

RIAS AS  HH International

Poor diversification

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

Pair Corralation between RIAS AS and HH International

Assuming the 90 days trading horizon RIAS AS is expected to generate 1.52 times more return on investment than HH International. However, RIAS AS is 1.52 times more volatile than HH International AS. It trades about -0.05 of its potential returns per unit of risk. HH International AS is currently generating about -0.17 per unit of risk. If you would invest  65,500  in RIAS AS on September 11, 2024 and sell it today you would lose (5,500) from holding RIAS AS or give up 8.4% of portfolio value over 90 days.

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

RIAS AS  vs.  HH International AS

RIAS AS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RIAS AS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

HH International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HH International AS has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with RIAS AS and HH International

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

The idea behind RIAS AS and HH International AS 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.