Correlation Between HE Equipment and Whirlpool
Can any of the company-specific risk be diversified away by investing in both HE Equipment and Whirlpool 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 Whirlpool 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 Whirlpool, you can compare the effects of market volatilities on HE Equipment and Whirlpool 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 Whirlpool. Check out your portfolio center. Please also check ongoing floating volatility patterns of HE Equipment and Whirlpool.
Diversification Opportunities for HE Equipment and Whirlpool
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between HEES and Whirlpool is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding HE Equipment Services and Whirlpool in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whirlpool 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 Whirlpool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whirlpool has no effect on the direction of HE Equipment i.e., HE Equipment and Whirlpool go up and down completely randomly.
Pair Corralation between HE Equipment and Whirlpool
Given the investment horizon of 90 days HE Equipment Services is expected to generate 1.09 times more return on investment than Whirlpool. However, HE Equipment is 1.09 times more volatile than Whirlpool. It trades about 0.09 of its potential returns per unit of risk. Whirlpool is currently generating about -0.03 per unit of risk. If you would invest 3,609 in HE Equipment Services on January 25, 2024 and sell it today you would earn a total of 2,258 from holding HE Equipment Services or generate 62.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HE Equipment Services vs. Whirlpool
Performance |
| Timeline |
| HE Equipment Services |
| Whirlpool |
HE Equipment and Whirlpool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HE Equipment and Whirlpool
The main advantage of trading using opposite HE Equipment and Whirlpool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HE Equipment position performs unexpectedly, Whirlpool 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 Whirlpool will offset losses from the drop in Whirlpool's long position.| HE Equipment vs. The Aarons | HE Equipment vs. McGrath RentCorp | HE Equipment vs. PROG Holdings | HE Equipment vs. Ryder System |
| Whirlpool vs. Flexsteel Industries | Whirlpool vs. Natuzzi SpA | Whirlpool vs. Crown Crafts | Whirlpool vs. Bassett Furniture Industries |
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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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