Correlation Between Quant and HT

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

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

Diversification Opportunities for Quant and HT

-0.38

Correlation Coefficient

Quant  HT

Very good diversification

The 3 months correlation between Quant and HT is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Quant and HT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HT and Quant 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 Quant are associated (or correlated) with HT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HT has no effect on the direction of Quant i.e., Quant and HT go up and down completely randomly.

Pair Corralation between Quant and HT

Assuming the 90 days trading horizon Quant is expected to generate 0.93 times more return on investment than HT. However, Quant is 1.07 times less risky than HT. It trades about 0.03 of its potential returns per unit of risk. HT is currently generating about -0.07 per unit of risk. If you would invest  8,709  in Quant on January 26, 2024 and sell it today you would earn a total of  2,076  from holding Quant or generate 23.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.81%
Values	Daily Returns

Quant  vs.  HT

Quant

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Quant is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

HT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Crypto's fundamental indicators remain rather sound which may send shares a bit higher in May 2024. The latest tumult may also be a sign of longer-term up-swing for HT shareholders.

Pair Trading with Quant and HT

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

The idea behind Quant and HT 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.