Correlation Between HE Equipment and Aarons

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

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

Diversification Opportunities for HE Equipment and Aarons

-0.73

Correlation Coefficient

HE Equipment  Aarons

Pay attention - limited upside

The 3 months correlation between HEES and Aarons is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and The Aarons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aarons and HE Equipment 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 HE Equipment Services are associated (or correlated) with Aarons. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aarons has no effect on the direction of HE Equipment i.e., HE Equipment and Aarons go up and down completely randomly.

Pair Corralation between HE Equipment and Aarons

Given the investment horizon of 90 days HE Equipment Services is expected to under-perform the Aarons. In addition to that, HE Equipment is 1.74 times more volatile than The Aarons. It trades about -0.26 of its total potential returns per unit of risk. The Aarons is currently generating about -0.15 per unit of volatility. If you would invest  755.00  in The Aarons on February 1, 2024 and sell it today you would lose (64.00) from holding The Aarons or give up 8.48% of portfolio value over 90 days.

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

HE Equipment Services  vs.  The Aarons

HE Equipment Services

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Aarons

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Aarons 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 very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HE Equipment and Aarons

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

The idea behind HE Equipment Services and The Aarons 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.