# Correlation Between Hawkins and Equillium

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

## Diversification Opportunities for Hawkins and Equillium

 0.55 Correlation Coefficient

### Very weak diversification

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

## Pair Corralation between Hawkins and Equillium

Given the investment horizon of 90 days Hawkins is expected to generate 0.2 times more return on investment than Equillium. However, Hawkins is 5.05 times less risky than Equillium. It trades about -0.1 of its potential returns per unit of risk. Equillium is currently generating about -0.36 per unit of risk. If you would invest  7,688  in Hawkins on January 22, 2024 and sell it today you would lose (225.00) from holding Hawkins or give up 2.93% of portfolio value over 90 days.
 Time Period 3 Months [change] Direction Moves Together Strength Weak Accuracy 100.0% Values Daily Returns

## Hawkins  vs.  Equillium

 Performance
 Timeline
 Hawkins Correlation Profile

### 7 of 100

 Weak Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.
 Performance Backtest Predict
 Equillium Correlation Profile

### 12 of 100

 Weak Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.
 Performance Backtest Predict

## Hawkins and Equillium Volatility Contrast

 Predicted Return Density
 Returns

## Pair Trading with Hawkins and Equillium

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