Correlation Between Formetal and Homecast CoLtd
Can any of the company-specific risk be diversified away by investing in both Formetal 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 Formetal and Homecast CoLtd into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Formetal Co and Homecast CoLtd, you can compare the effects of market volatilities on Formetal 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 Formetal with a short position of Homecast CoLtd. Check out your portfolio center. Please also check ongoing floating volatility patterns of Formetal and Homecast CoLtd.
Diversification Opportunities for Formetal and Homecast CoLtd
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Formetal and Homecast is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Formetal Co and Homecast CoLtd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homecast CoLtd and Formetal 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 Formetal Co 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 Formetal i.e., Formetal and Homecast CoLtd go up and down completely randomly.
Pair Corralation between Formetal and Homecast CoLtd
Assuming the 90 days trading horizon Formetal Co is expected to generate 1.6 times more return on investment than Homecast CoLtd. However, Formetal is 1.6 times more volatile than Homecast CoLtd. It trades about 0.13 of its potential returns per unit of risk. Homecast CoLtd is currently generating about -0.33 per unit of risk. If you would invest 311,192 in Formetal Co on October 16, 2024 and sell it today you would earn a total of 28,308 from holding Formetal Co or generate 9.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Formetal Co vs. Homecast CoLtd
Performance |
| Timeline |
| Formetal |
| Homecast CoLtd |
Formetal and Homecast CoLtd Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Formetal and Homecast CoLtd
The main advantage of trading using opposite Formetal and Homecast CoLtd positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Formetal 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.| Formetal vs. SBI Investment KOREA | Formetal vs. DC Media Co | Formetal vs. Nice Information Telecommunication | Formetal vs. NH Investment Securities |
| Homecast CoLtd vs. Duksan Hi Metal | Homecast CoLtd vs. Formetal Co | Homecast CoLtd vs. Daiyang Metal Co | Homecast CoLtd vs. Daejung Chemicals Metals |
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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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