Correlation Between Hess and GENERAL

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

By analyzing existing cross correlation between Hess Corporation and GENERAL ELEC CAP, you can compare the effects of market volatilities on Hess and GENERAL 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 Hess with a short position of GENERAL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess and GENERAL.

Diversification Opportunities for Hess and GENERAL

0.55

Correlation Coefficient

Hess  GENERAL

Very weak diversification

The 3 months correlation between Hess and GENERAL is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP and Hess 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 Hess Corporation are associated (or correlated) with GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Hess i.e., Hess and GENERAL go up and down completely randomly.

Pair Corralation between Hess and GENERAL

Considering the 90-day investment horizon Hess Corporation is expected to generate 1.35 times more return on investment than GENERAL. However, Hess is 1.35 times more volatile than GENERAL ELEC CAP. It trades about 0.08 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.21 per unit of risk. If you would invest  14,933  in Hess Corporation on January 20, 2024 and sell it today you would earn a total of  245.00  from holding Hess Corporation or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	36.36%
Values	Daily Returns

Hess Corp.  vs.  GENERAL ELEC CAP

Hess

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Hess may actually be approaching a critical reversion point that can send shares even higher in May 2024.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Hess and GENERAL

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

The idea behind Hess Corporation and GENERAL ELEC CAP 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.