Correlation Between HanS Laser and DO Home

Can any of the company-specific risk be diversified away by investing in both HanS Laser and DO Home 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 HanS Laser and DO Home into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between HanS Laser Tech and DO Home Collection, you can compare the effects of market volatilities on HanS Laser and DO Home 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 HanS Laser with a short position of DO Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of HanS Laser and DO Home.

Diversification Opportunities for HanS Laser and DO Home

0.62

Correlation Coefficient

HanS Laser  DO Home

Poor diversification

The 3 months correlation between HanS and 002798 is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HanS Laser Tech and DO Home Collection in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DO Home Collection and HanS Laser 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 HanS Laser Tech are associated (or correlated) with DO Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DO Home Collection has no effect on the direction of HanS Laser i.e., HanS Laser and DO Home go up and down completely randomly.

Pair Corralation between HanS Laser and DO Home

Assuming the 90 days trading horizon HanS Laser Tech is expected to under-perform the DO Home. But the stock apears to be less risky and, when comparing its historical volatility, HanS Laser Tech is 1.39 times less risky than DO Home. The stock trades about -0.03 of its potential returns per unit of risk. The DO Home Collection is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  371.00  in DO Home Collection on October 9, 2024 and sell it today you would lose (24.00) from holding DO Home Collection or give up 6.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

HanS Laser Tech  vs.  DO Home Collection

HanS Laser Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HanS Laser Tech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HanS Laser is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DO Home Collection

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DO Home Collection has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, DO Home is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with HanS Laser and DO Home

The main advantage of trading using opposite HanS Laser and DO Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HanS Laser position performs unexpectedly, DO Home 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 DO Home will offset losses from the drop in DO Home's long position.

The idea behind HanS Laser Tech and DO Home Collection 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.