Correlation Between Home Center and LegoChem Biosciences
Can any of the company-specific risk be diversified away by investing in both Home Center and LegoChem Biosciences 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 LegoChem Biosciences 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 LegoChem Biosciences, you can compare the effects of market volatilities on Home Center and LegoChem Biosciences 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 LegoChem Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Center and LegoChem Biosciences.
Diversification Opportunities for Home Center and LegoChem Biosciences
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Home and LegoChem is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Home Center Holdings and LegoChem Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LegoChem Biosciences 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 LegoChem Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LegoChem Biosciences has no effect on the direction of Home Center i.e., Home Center and LegoChem Biosciences go up and down completely randomly.
Pair Corralation between Home Center and LegoChem Biosciences
Assuming the 90 days trading horizon Home Center Holdings is expected to generate 0.42 times more return on investment than LegoChem Biosciences. However, Home Center Holdings is 2.35 times less risky than LegoChem Biosciences. It trades about -0.12 of its potential returns per unit of risk. LegoChem Biosciences is currently generating about -0.25 per unit of risk. If you would invest 81,200 in Home Center Holdings on September 1, 2024 and sell it today you would lose (4,500) from holding Home Center Holdings or give up 5.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Home Center Holdings vs. LegoChem Biosciences
Performance |
| Timeline |
| Home Center Holdings |
| LegoChem Biosciences |
Home Center and LegoChem Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Home Center and LegoChem Biosciences
The main advantage of trading using opposite Home Center and LegoChem Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Center position performs unexpectedly, LegoChem Biosciences 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 LegoChem Biosciences will offset losses from the drop in LegoChem Biosciences' long position.| Home Center vs. LG Chemicals | Home Center vs. POSCO Holdings | Home Center vs. Hanwha Solutions | Home Center vs. Hyundai Steel |
| LegoChem Biosciences vs. Home Center Holdings | LegoChem Biosciences vs. Woori Technology | LegoChem Biosciences vs. Daechang Steel Co | LegoChem Biosciences vs. BGF Retail Co |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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