Correlation Between Honest and Hammer Metals

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Can any of the company-specific risk be diversified away by investing in both Honest and Hammer Metals 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 Honest and Hammer Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honest Company and Hammer Metals Limited, you can compare the effects of market volatilities on Honest and Hammer Metals 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 Honest with a short position of Hammer Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Hammer Metals.

Diversification Opportunities for Honest and Hammer Metals

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Honest and Hammer is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Hammer Metals Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hammer Metals Limited and Honest 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 Honest Company are associated (or correlated) with Hammer Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hammer Metals Limited has no effect on the direction of Honest i.e., Honest and Hammer Metals go up and down completely randomly.

Pair Corralation between Honest and Hammer Metals

If you would invest  360.00  in Honest Company on December 29, 2023 and sell it today you would earn a total of  23.00  from holding Honest Company or generate 6.39% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy0.54%
ValuesDaily Returns

Honest Company  vs.  Hammer Metals Limited

 Performance 
       Timeline  
Honest Company 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Honest Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Honest unveiled solid returns over the last few months and may actually be approaching a breakup point.
Hammer Metals Limited 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Hammer Metals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hammer Metals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Honest and Hammer Metals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Honest and Hammer Metals

The main advantage of trading using opposite Honest and Hammer Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honest position performs unexpectedly, Hammer Metals 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 Hammer Metals will offset losses from the drop in Hammer Metals' long position.
The idea behind Honest Company and Hammer Metals Limited 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.

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