Correlation Between RH and Halfords Group
Can any of the company-specific risk be diversified away by investing in both RH and Halfords Group 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 RH and Halfords Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RH and Halfords Group PLC, you can compare the effects of market volatilities on RH and Halfords Group 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 RH with a short position of Halfords Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of RH and Halfords Group.
Diversification Opportunities for RH and Halfords Group
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between RH and Halfords is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding RH and Halfords Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halfords Group PLC and RH 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 RH are associated (or correlated) with Halfords Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halfords Group PLC has no effect on the direction of RH i.e., RH and Halfords Group go up and down completely randomly.
Pair Corralation between RH and Halfords Group
Allowing for the 90-day total investment horizon RH is expected to generate 1.88 times more return on investment than Halfords Group. However, RH is 1.88 times more volatile than Halfords Group PLC. It trades about 0.4 of its potential returns per unit of risk. Halfords Group PLC is currently generating about -0.03 per unit of risk. If you would invest 31,190 in RH on August 30, 2024 and sell it today you would earn a total of 7,466 from holding RH or generate 23.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
RH vs. Halfords Group PLC
Performance |
| Timeline |
| RH |
| Halfords Group PLC |
RH and Halfords Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RH and Halfords Group
The main advantage of trading using opposite RH and Halfords Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RH position performs unexpectedly, Halfords Group 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 Halfords Group will offset losses from the drop in Halfords Group's long position.The idea behind RH and Halfords Group PLC 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.| Halfords Group vs. Evgo Inc | Halfords Group vs. Ulta Beauty | Halfords Group vs. Best Buy Co | Halfords Group vs. RH |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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