Can any of the company-specific risk be diversified away by investing in both Hims Hers and 00108WAF7 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 Hims Hers and 00108WAF7 into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hims Hers Health and AEP TEX INC, you can compare the effects of market volatilities on Hims Hers and 00108WAF7 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 Hims Hers with a short position of 00108WAF7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hims Hers and 00108WAF7.
Diversification Opportunities for Hims Hers and 00108WAF7
The 3 months correlation between Hims and 00108WAF7 is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Hims Hers Health and AEP TEX INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX INC and Hims Hers 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 Hims Hers Health are associated (or correlated) with 00108WAF7. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX INC has no effect on the direction of Hims Hers i.e., Hims Hers and 00108WAF7 go up and down completely randomly.
Given the investment horizon of 90 days Hims Hers Health is expected to generate 2.64 times more return on investment than 00108WAF7. However, Hims Hers is 2.64 times more volatile than AEP TEX INC. It trades about 0.16 of its potential returns per unit of risk. AEP TEX INC is currently generating about 0.08 per unit of risk. If you would invest 872.00 in Hims Hers Health on March 6, 2024 and sell it today you would earn a total of 1,211 from holding Hims Hers Health or generate 138.88% return on investment over 90 days.
Compared to the overall equity markets, risk-adjusted returns on investments in Hims Hers Health are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile primary indicators, Hims Hers unveiled solid returns over the last few months and may actually be approaching a breakup point.
Compared to the overall equity markets, risk-adjusted returns on investments in AEP TEX INC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, 00108WAF7 sustained solid returns over the last few months and may actually be approaching a breakup point.