Correlation Between Armada Hflr and Equinix

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

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

Diversification Opportunities for Armada Hflr and Equinix

0.68

Correlation Coefficient

Armada Hflr  Equinix

Poor diversification

The 3 months correlation between Armada and Equinix is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hflr Pr and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix and Armada Hflr 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 Armada Hflr Pr are associated (or correlated) with Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Armada Hflr i.e., Armada Hflr and Equinix go up and down completely randomly.

Pair Corralation between Armada Hflr and Equinix

Considering the 90-day investment horizon Armada Hflr is expected to generate 1.69 times less return on investment than Equinix. But when comparing it to its historical volatility, Armada Hflr Pr is 1.05 times less risky than Equinix. It trades about 0.04 of its potential returns per unit of risk. Equinix is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  55,621  in Equinix on June 23, 2024 and sell it today you would earn a total of  32,099  from holding Equinix or generate 57.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Armada Hflr Pr  vs.  Equinix

Armada Hflr Pr

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Hflr Pr are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak technical indicators, Armada Hflr may actually be approaching a critical reversion point that can send shares even higher in October 2024.

Equinix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armada Hflr and Equinix

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

The idea behind Armada Hflr Pr and Equinix 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.