Correlation Between Taurus Armas and H1II34

Can any of the company-specific risk be diversified away by investing in both Taurus Armas and H1II34 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 Taurus Armas and H1II34 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Taurus Armas SA and H1II34, you can compare the effects of market volatilities on Taurus Armas and H1II34 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 Taurus Armas with a short position of H1II34. Check out your portfolio center. Please also check ongoing floating volatility patterns of Taurus Armas and H1II34.

Diversification Opportunities for Taurus Armas and H1II34

0.7

Correlation Coefficient

Taurus Armas  H1II34

Poor diversification

The 3 months correlation between Taurus and H1II34 is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Taurus Armas SA and H1II34 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H1II34 and Taurus Armas 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 Taurus Armas SA are associated (or correlated) with H1II34. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H1II34 has no effect on the direction of Taurus Armas i.e., Taurus Armas and H1II34 go up and down completely randomly.

Pair Corralation between Taurus Armas and H1II34

Assuming the 90 days trading horizon Taurus Armas SA is expected to under-perform the H1II34. But the stock apears to be less risky and, when comparing its historical volatility, Taurus Armas SA is 2.14 times less risky than H1II34. The stock trades about -0.17 of its potential returns per unit of risk. The H1II34 is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,903  in H1II34 on September 23, 2024 and sell it today you would lose (353.00) from holding H1II34 or give up 18.55% of portfolio value over 90 days.

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

Taurus Armas SA  vs.  H1II34

Taurus Armas SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Taurus Armas SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

H1II34

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H1II34 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Taurus Armas and H1II34

The main advantage of trading using opposite Taurus Armas and H1II34 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Taurus Armas position performs unexpectedly, H1II34 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 H1II34 will offset losses from the drop in H1II34's long position.

The idea behind Taurus Armas SA and H1II34 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.