Correlation Between Hour Loop and Solo Brands
Can any of the company-specific risk be diversified away by investing in both Hour Loop and Solo Brands 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 Hour Loop and Solo Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hour Loop and Solo Brands, you can compare the effects of market volatilities on Hour Loop and Solo Brands 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 Hour Loop with a short position of Solo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hour Loop and Solo Brands.
Diversification Opportunities for Hour Loop and Solo Brands
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hour and Solo is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hour Loop and Solo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solo Brands and Hour Loop 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 Hour Loop are associated (or correlated) with Solo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solo Brands has no effect on the direction of Hour Loop i.e., Hour Loop and Solo Brands go up and down completely randomly.
Pair Corralation between Hour Loop and Solo Brands
Given the investment horizon of 90 days Hour Loop is expected to under-perform the Solo Brands. In addition to that, Hour Loop is 2.35 times more volatile than Solo Brands. It trades about -0.04 of its total potential returns per unit of risk. Solo Brands is currently generating about -0.04 per unit of volatility. If you would invest 216.00 in Solo Brands on February 21, 2024 and sell it today you would lose (14.00) from holding Solo Brands or give up 6.48% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Hour Loop vs. Solo Brands
Performance |
Timeline |
Hour Loop |
Solo Brands |
Hour Loop and Solo Brands Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hour Loop and Solo Brands
The main advantage of trading using opposite Hour Loop and Solo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hour Loop position performs unexpectedly, Solo Brands 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 Solo Brands will offset losses from the drop in Solo Brands' long position.The idea behind Hour Loop and Solo Brands 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.Solo Brands vs. Bowlero Corp | Solo Brands vs. Xponential Fitness | Solo Brands vs. Life Time Group | Solo Brands vs. Planet Fitness |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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