Correlation Between Home Center and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Home Center and Homecast CoLtd 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 Home Center and Homecast CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Center Holdings and Homecast CoLtd, you can compare the effects of market volatilities on Home Center and Homecast CoLtd 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 Home Center with a short position of Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and Homecast CoLtd.
Diversification Opportunities for Home Center and Homecast CoLtd
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Home and Homecast is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and Home Center 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 Home Center Holdings are associated (or correlated) with Homecast CoLtd. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homecast CoLtd has no effect on the direction of Home Center i.e., Home Center and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Home Center and Homecast CoLtd
Assuming the 90 days trading horizon Home Center Holdings is expected to generate 0.65 times more return on investment than Homecast CoLtd. However, Home Center Holdings is 1.53 times less risky than Homecast CoLtd. It trades about -0.1 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.09 per unit of risk. If you would invest 80,600 in Home Center Holdings on September 3, 2024 and sell it today you would lose (3,900) from holding Home Center Holdings or give up 4.84% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Home Center Holdings vs. Homecast CoLtd
Performance |
| Timeline |
| Home Center Holdings |
| Homecast CoLtd |
Home Center and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Center and Homecast CoLtd
The main advantage of trading using opposite Home Center and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Center position performs unexpectedly, Homecast CoLtd 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 Homecast CoLtd will offset losses from the drop in Homecast CoLtd's long position.| Home Center vs. Aprogen Healthcare Games | Home Center vs. Sejong Telecom | Home Center vs. Daishin Information Communications | Home Center vs. Hanjin Transportation Co |
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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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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