Correlation Between Home Product and DOHOME

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Can any of the company-specific risk be diversified away by investing in both Home Product and DOHOME 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 Product and DOHOME into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Home Product Center and DOHOME, you can compare the effects of market volatilities on Home Product and DOHOME 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 Product with a short position of DOHOME. Check out your portfolio center. Please also check ongoing floating volatility patterns of Home Product and DOHOME.

Diversification Opportunities for Home Product and DOHOME

0.92
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Home and DOHOME is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Home Product Center and DOHOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOHOME and Home Product 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 Product Center are associated (or correlated) with DOHOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOHOME has no effect on the direction of Home Product i.e., Home Product and DOHOME go up and down completely randomly.

Pair Corralation between Home Product and DOHOME

Assuming the 90 days trading horizon Home Product Center is expected to generate 0.6 times more return on investment than DOHOME. However, Home Product Center is 1.67 times less risky than DOHOME. It trades about -0.08 of its potential returns per unit of risk. DOHOME is currently generating about -0.06 per unit of risk. If you would invest  895.00  in Home Product Center on November 27, 2024 and sell it today you would lose (45.00) from holding Home Product Center or give up 5.03% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Home Product Center  vs.  DOHOME

 Performance 
       Timeline  
Home Product Center 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Home Product Center has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.
DOHOME 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days DOHOME has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Home Product and DOHOME Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Home Product and DOHOME

The main advantage of trading using opposite Home Product and DOHOME positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Home Product position performs unexpectedly, DOHOME 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 DOHOME will offset losses from the drop in DOHOME's long position.
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The idea behind Home Product Center and DOHOME pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Directory module to find actively traded commodities issued by global exchanges.

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