Correlation Between Quant and HYN

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

Diversification Opportunities for Quant and HYN

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Quant and HYN is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Quant and HYN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HYN 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 HYN. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HYN has no effect on the direction of Quant i.e., Quant and HYN go up and down completely randomly.

Pair Corralation between Quant and HYN

Assuming the 90 days trading horizon Quant is expected to generate 1.41 times more return on investment than HYN. However, Quant is 1.41 times more volatile than HYN. It trades about 0.05 of its potential returns per unit of risk. HYN is currently generating about 0.0 per unit of risk. If you would invest  7,238  in Quant on December 30, 2023 and sell it today you would earn a total of  6,586  from holding Quant or generate 90.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy73.43%
ValuesDaily Returns

Quant  vs.  HYN

 Performance 
       Timeline  
Quant 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Quant are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Quant exhibited solid returns over the last few months and may actually be approaching a breakup point.
HYN 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days HYN has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, HYN is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Quant and HYN Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Quant and HYN

The main advantage of trading using opposite Quant and HYN positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quant position performs unexpectedly, HYN 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 HYN will offset losses from the drop in HYN's long position.
The idea behind Quant and HYN 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 CEOs Directory module to screen CEOs from public companies around the world.

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