Correlation Between DO Home and Zoy Home

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

Diversification Opportunities for DO Home and Zoy Home

0.82
  Correlation Coefficient

Very poor diversification

The 3 months correlation between 002798 and Zoy is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding DO Home Collection and Zoy Home Furnishing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zoy Home Furnishing and DO Home 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 DO Home Collection are associated (or correlated) with Zoy Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zoy Home Furnishing has no effect on the direction of DO Home i.e., DO Home and Zoy Home go up and down completely randomly.

Pair Corralation between DO Home and Zoy Home

Assuming the 90 days trading horizon DO Home Collection is expected to under-perform the Zoy Home. In addition to that, DO Home is 1.27 times more volatile than Zoy Home Furnishing. It trades about -0.13 of its total potential returns per unit of risk. Zoy Home Furnishing is currently generating about -0.05 per unit of volatility. If you would invest  1,143  in Zoy Home Furnishing on October 20, 2024 and sell it today you would lose (71.00) from holding Zoy Home Furnishing or give up 6.21% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

DO Home Collection  vs.  Zoy Home Furnishing

 Performance 
       Timeline  
DO Home Collection 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days DO Home Collection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DO Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Zoy Home Furnishing 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Zoy Home Furnishing are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Zoy Home sustained solid returns over the last few months and may actually be approaching a breakup point.

DO Home and Zoy Home Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DO Home and Zoy Home

The main advantage of trading using opposite DO Home and Zoy Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DO Home position performs unexpectedly, Zoy Home 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 Zoy Home will offset losses from the drop in Zoy Home's long position.
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The idea behind DO Home Collection and Zoy Home Furnishing 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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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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