Correlation Between HE Equipment and Cumulus Media

Can any of the company-specific risk be diversified away by investing in both HE Equipment and Cumulus Media 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 Cumulus Media 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 Cumulus Media Class, you can compare the effects of market volatilities on HE Equipment and Cumulus Media 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 Cumulus Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Cumulus Media.

Diversification Opportunities for HE Equipment and Cumulus Media

-0.71

Correlation Coefficient

HE Equipment  Cumulus Media

Pay attention - limited upside

The 3 months correlation between HEES and Cumulus is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Cumulus Media Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumulus Media Class 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 Cumulus Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumulus Media Class has no effect on the direction of HE Equipment i.e., HE Equipment and Cumulus Media go up and down completely randomly.

Pair Corralation between HE Equipment and Cumulus Media

Given the investment horizon of 90 days HE Equipment Services is expected to generate 0.45 times more return on investment than Cumulus Media. However, HE Equipment Services is 2.23 times less risky than Cumulus Media. It trades about -0.15 of its potential returns per unit of risk. Cumulus Media Class is currently generating about -0.29 per unit of risk. If you would invest  6,297  in HE Equipment Services on January 31, 2024 and sell it today you would lose (375.00) from holding HE Equipment Services or give up 5.96% 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.  Cumulus Media Class

HE Equipment Services

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HE Equipment Services are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, HE Equipment may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Cumulus Media Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cumulus Media Class 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 essential indicators remain comparatively stable which may send shares a bit higher in May 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with HE Equipment and Cumulus Media

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

The idea behind HE Equipment Services and Cumulus Media Class 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.