Correlation Between Definitive and HIT

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

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

Diversification Opportunities for Definitive and HIT

0.73

Correlation Coefficient

Definitive  HIT

Poor diversification

The 3 months correlation between Definitive and HIT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Definitive and HIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIT and Definitive 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 Definitive are associated (or correlated) with HIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HIT has no effect on the direction of Definitive i.e., Definitive and HIT go up and down completely randomly.

Pair Corralation between Definitive and HIT

Assuming the 90 days trading horizon Definitive is expected to generate 1.01 times less return on investment than HIT. But when comparing it to its historical volatility, Definitive is 1.29 times less risky than HIT. It trades about 0.19 of its potential returns per unit of risk. HIT is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  0.00  in HIT on July 3, 2025 and sell it today you would earn a total of  0.00  from holding HIT or generate 300.0% return on investment over 90 days.

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

Definitive  vs.  HIT

Definitive

Risk-Adjusted Performance

Good

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

HIT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HIT are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, HIT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Definitive and HIT

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

The idea behind Definitive and HIT 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.

Check out your portfolio center.

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 AI Portfolio Prophet module to use AI to generate optimal portfolios and find profitable investment opportunities.