Correlation Between Libstar Holdings and HomeChoice Investments
Can any of the company-specific risk be diversified away by investing in both Libstar Holdings 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 Libstar Holdings and HomeChoice Investments into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Libstar Holdings and HomeChoice Investments, you can compare the effects of market volatilities on Libstar Holdings 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 Libstar Holdings with a short position of HomeChoice Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Libstar Holdings and HomeChoice Investments.
Diversification Opportunities for Libstar Holdings and HomeChoice Investments
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Libstar and HomeChoice is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Libstar Holdings and HomeChoice Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HomeChoice Investments and Libstar Holdings 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 Libstar Holdings 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 Libstar Holdings i.e., Libstar Holdings and HomeChoice Investments go up and down completely randomly.
Pair Corralation between Libstar Holdings and HomeChoice Investments
Assuming the 90 days trading horizon Libstar Holdings is expected to generate 1.26 times more return on investment than HomeChoice Investments. However, Libstar Holdings is 1.26 times more volatile than HomeChoice Investments. It trades about -0.05 of its potential returns per unit of risk. HomeChoice Investments is currently generating about -0.13 per unit of risk. If you would invest 41,000 in Libstar Holdings on November 28, 2024 and sell it today you would lose (1,500) from holding Libstar Holdings or give up 3.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Libstar Holdings vs. HomeChoice Investments
Performance |
| Timeline |
| Libstar Holdings |
| HomeChoice Investments |
Libstar Holdings and HomeChoice Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Libstar Holdings and HomeChoice Investments
The main advantage of trading using opposite Libstar Holdings and HomeChoice Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Libstar Holdings 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.| Libstar Holdings vs. Lesaka Technologies | Libstar Holdings vs. Bytes Technology | Libstar Holdings vs. British American Tobacco | Libstar Holdings vs. Advtech |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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