Correlation Between HomeChoice Investments and Lighthouse Capital
Can any of the company-specific risk be diversified away by investing in both HomeChoice Investments and Lighthouse Capital 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 HomeChoice Investments and Lighthouse Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HomeChoice Investments and Lighthouse Capital, you can compare the effects of market volatilities on HomeChoice Investments and Lighthouse Capital 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 HomeChoice Investments with a short position of Lighthouse Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of HomeChoice Investments and Lighthouse Capital.
Diversification Opportunities for HomeChoice Investments and Lighthouse Capital
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between HomeChoice and Lighthouse is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding HomeChoice Investments and Lighthouse Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lighthouse Capital and HomeChoice Investments 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 HomeChoice Investments are associated (or correlated) with Lighthouse Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lighthouse Capital has no effect on the direction of HomeChoice Investments i.e., HomeChoice Investments and Lighthouse Capital go up and down completely randomly.
Pair Corralation between HomeChoice Investments and Lighthouse Capital
Assuming the 90 days trading horizon HomeChoice Investments is expected to generate 2.14 times more return on investment than Lighthouse Capital. However, HomeChoice Investments is 2.14 times more volatile than Lighthouse Capital. It trades about 0.08 of its potential returns per unit of risk. Lighthouse Capital is currently generating about 0.05 per unit of risk. If you would invest 196,000 in HomeChoice Investments on September 2, 2024 and sell it today you would earn a total of 104,000 from holding HomeChoice Investments or generate 53.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.59% |
| Values | Daily Returns |
HomeChoice Investments vs. Lighthouse Capital
Performance |
| Timeline |
| HomeChoice Investments |
| Lighthouse Capital |
HomeChoice Investments and Lighthouse Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HomeChoice Investments and Lighthouse Capital
The main advantage of trading using opposite HomeChoice Investments and Lighthouse Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HomeChoice Investments position performs unexpectedly, Lighthouse Capital 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 Lighthouse Capital will offset losses from the drop in Lighthouse Capital's long position.| HomeChoice Investments vs. RCL Foods | HomeChoice Investments vs. Hosken Consolidated Investments | HomeChoice Investments vs. Deneb Investments | HomeChoice Investments vs. Bytes Technology |
| Lighthouse Capital vs. Kap Industrial Holdings | Lighthouse Capital vs. Zeder Investments | Lighthouse Capital vs. Blue Label Telecoms | Lighthouse Capital vs. Standard Bank Group |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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