Correlation Between Honest and Hot Mamas

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

By analyzing existing cross correlation between Honest Company and Hot Mamas Foods, you can compare the effects of market volatilities on Honest and Hot Mamas 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 Hot Mamas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honest and Hot Mamas.

Diversification Opportunities for Honest and Hot Mamas

0.0

Correlation Coefficient

Honest  Hot Mamas

Pay attention - limited upside

The 3 months correlation between Honest and Hot is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Honest Company and Hot Mamas Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hot Mamas Foods 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 Hot Mamas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hot Mamas Foods has no effect on the direction of Honest i.e., Honest and Hot Mamas go up and down completely randomly.

Pair Corralation between Honest and Hot Mamas

If you would invest (100.00) in Hot Mamas Foods on January 24, 2024 and sell it today you would earn a total of  100.00  from holding Hot Mamas Foods or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Honest Company  vs.  Hot Mamas Foods

Honest Company

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Honest Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Honest unveiled solid returns over the last few months and may actually be approaching a breakup point.

Hot Mamas Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hot Mamas Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Hot Mamas is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Honest and Hot Mamas

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

The idea behind Honest Company and Hot Mamas Foods 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.