Correlation Between Compagnie Financire and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Compagnie Financire and HomeChoice Investments 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 Compagnie Financire and HomeChoice Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compagnie Financire Richemont and HomeChoice Investments, you can compare the effects of market volatilities on Compagnie Financire and HomeChoice Investments 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 Compagnie Financire with a short position of HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compagnie Financire and HomeChoice Investments.
Diversification Opportunities for Compagnie Financire and HomeChoice Investments
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Compagnie and HomeChoice is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Compagnie Financire Richemont and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments and Compagnie Financire 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 Compagnie Financire Richemont are associated (or correlated) with HomeChoice Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HomeChoice Investments has no effect on the direction of Compagnie Financire i.e., Compagnie Financire and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Compagnie Financire and HomeChoice Investments
Assuming the 90 days trading horizon Compagnie Financire Richemont is expected to under-perform the HomeChoice Investments. But the stock apears to be less risky and, when comparing its historical volatility, Compagnie Financire Richemont is 1.85 times less risky than HomeChoice Investments. The stock trades about -0.21 of its potential returns per unit of risk. The HomeChoice Investments is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest 380,000 in HomeChoice Investments on August 25, 2024 and sell it today you would lose (25,000) from holding HomeChoice Investments or give up 6.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Compagnie Financire Richemont vs. HomeChoice Investments
Performance |
| Timeline |
| Compagnie Financire |
| HomeChoice Investments |
Compagnie Financire and HomeChoice Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compagnie Financire and HomeChoice Investments
The main advantage of trading using opposite Compagnie Financire and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compagnie Financire position performs unexpectedly, HomeChoice Investments 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 HomeChoice Investments will offset losses from the drop in HomeChoice Investments' long position.| Compagnie Financire vs. HomeChoice Investments | Compagnie Financire vs. Standard Bank Group | Compagnie Financire vs. Hosken Consolidated Investments | Compagnie Financire vs. Astoria Investments |
| HomeChoice Investments vs. Foschini Group | HomeChoice Investments vs. Sasol Ltd Bee | HomeChoice Investments vs. Centaur Bci Balanced | HomeChoice Investments vs. Sabvest Capital |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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