Correlation Between Wormhole and HIT

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

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

Diversification Opportunities for Wormhole and HIT

0.63

Correlation Coefficient

Wormhole  HIT

Poor diversification

The 3 months correlation between Wormhole and HIT is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Wormhole and HIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HIT and Wormhole 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 Wormhole 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 Wormhole i.e., Wormhole and HIT go up and down completely randomly.

Pair Corralation between Wormhole and HIT

Given the investment horizon of 90 days Wormhole is expected to generate 341.1 times less return on investment than HIT. But when comparing it to its historical volatility, Wormhole is 26.35 times less risky than HIT. It trades about 0.01 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 May 6, 2025 and sell it today you would lose  0.00  from holding HIT or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Wormhole  vs.  HIT

Wormhole

Risk-Adjusted Performance

Very Weak

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

HIT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in HIT are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, HIT exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wormhole and HIT

The main advantage of trading using opposite Wormhole and HIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wormhole 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 Wormhole 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.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.