Correlation Between HVA Foods and Alumex PLC

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

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

Diversification Opportunities for HVA Foods and Alumex PLC

0.34

Correlation Coefficient

HVA Foods  Alumex PLC

Weak diversification

The 3 months correlation between HVA and Alumex is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HVA Foods PLC and Alumex PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alumex PLC and HVA Foods 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 HVA Foods PLC are associated (or correlated) with Alumex PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alumex PLC has no effect on the direction of HVA Foods i.e., HVA Foods and Alumex PLC go up and down completely randomly.

Pair Corralation between HVA Foods and Alumex PLC

Assuming the 90 days trading horizon HVA Foods is expected to generate 27.61 times less return on investment than Alumex PLC. But when comparing it to its historical volatility, HVA Foods PLC is 1.07 times less risky than Alumex PLC. It trades about 0.01 of its potential returns per unit of risk. Alumex PLC is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,130  in Alumex PLC on September 2, 2024 and sell it today you would earn a total of  90.00  from holding Alumex PLC or generate 7.96% return on investment over 90 days.

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

HVA Foods PLC  vs.  Alumex PLC

HVA Foods PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HVA Foods PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, HVA Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Alumex PLC

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alumex PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Alumex PLC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HVA Foods and Alumex PLC

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

The idea behind HVA Foods PLC and Alumex PLC 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 Stocks Directory module to find actively traded stocks across global markets.