Correlation Between Moelis and HHG Capital

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

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

Diversification Opportunities for Moelis and HHG Capital

-0.51

Correlation Coefficient

Moelis  HHG Capital

Excellent diversification

The 3 months correlation between Moelis and HHG is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Moelis Co and HHG Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HHG Capital and Moelis 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 Moelis Co are associated (or correlated) with HHG Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HHG Capital has no effect on the direction of Moelis i.e., Moelis and HHG Capital go up and down completely randomly.

Pair Corralation between Moelis and HHG Capital

Allowing for the 90-day total investment horizon Moelis is expected to generate 616.63 times less return on investment than HHG Capital. But when comparing it to its historical volatility, Moelis Co is 248.06 times less risky than HHG Capital. It trades about 0.14 of its potential returns per unit of risk. HHG Capital is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest  11.00  in HHG Capital on July 4, 2024 and sell it today you would lose (4.80) from holding HHG Capital or give up 43.64% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	27.27%
Values	Daily Returns

Moelis Co  vs.  HHG Capital

Moelis

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Moelis Co are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Moelis exhibited solid returns over the last few months and may actually be approaching a breakup point.

HHG Capital

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days HHG Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively unsteady fundamental indicators, HHG Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Moelis and HHG Capital

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

The idea behind Moelis Co and HHG Capital 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.